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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File
March 31, 1999 No. 0-1709
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RVM INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 31-1515410
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
753 W. Waterloo Road, Akron, Ohio 44314-1519
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (330) 753-4545
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (par value $.01 per share)
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(Title of Class)
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
-- --
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[X]
The aggregate market value of the voting stock held by non-affiliates as of June
7, 1999, based on a bid price of $4.50 was approximately $1,019,304. The
Registrant has no non-voting common equity.
There were 1,937,505 shares outstanding of the Registrant's common stock as of
June 7, 1999.
Documents Incorporated by Reference
-----------------------------------
None
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RVM INDUSTRIES, INC.
Index to Annual Report on Form 10-K
for the Fiscal Year Ended March 31, 1999
<TABLE>
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PART I PAGES
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<S> <C> <C>
Item 1 Business 3-8
Item 2 Properties 8-9
Item 3 Legal Proceedings 9
Item 4 Submission of Matters to a Vote of Security Holders 9
PART II
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Item 5 Market for Registrant's Common Equity and
Related Stockholder Matters 10
Item 6 Selected Financial Data 11
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-15
Item 7a Quantitative and Qualitative Disclosures about Market Risk 16
Item 8 Financial Statements and Supplementary Data 17-43
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 44
PART III
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Item 10 Directors and Executive Officers of the Registrant 45-46
Item 11 Executive Compensation 47-49
Item 12 Security Ownership of Certain Beneficial Owners
and Management 51
Item 13 Certain Relationships and Related Transactions 52
PART IV
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Item 14 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 53-55
</TABLE>
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PART I
ITEM 1. BUSINESS
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COMPANIES
RVM Industries, Inc. (RVM) is a publicly held holding company.
Ravens, Inc. (Ravens), Albex Aluminum, Inc. (Albex), and Signs and Blanks, Inc.
(SABI) are wholly owned subsidiaries of RVM. The "Company" refers to RVM,
Ravens, Albex and SABI, collectively. See Note 19 to the consolidated financial
statements for financial information about industry segments.
FISCAL YEAR
RVM's fiscal year ends on March 31. References to 1999, 1998, etc.
are for the fiscal years ended March 31, 1999, 1998, etc., respectively.
GENERAL DEVELOPMENT OF THE BUSINESS
Ravens Metal Products, Inc. was incorporated in the State of West
Virginia on April 9, 1956 and reincorporated in the State of Delaware on
September 3, 1986. Jacob Pollock (Pollock) acquired majority control on May 3,
1991.
On March 31, 1997, Ravens Metal Products, Inc. changed its name to
Ravens, Inc. and effected a reorganization with 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.
On March 31, 1997, RVM purchased all of the common stock of Albex and
SABI which were corporations wholly owned by Pollock, the majority shareholder
of RVM. Since this was a business combination of entities under common control,
the financial statements of prior years were restated to reflect the combination
on an "as if pooling of interests" basis.
RVM acquired Albex and SABI because these companies, like Ravens,
utilize aluminum as the major material in their products, and RVM believes that
access to capital markets and the trading value of RVM's common stock may be
enhanced by increasing the size of RVM. The purchase prices of Albex and SABI
are contingent upon future earnings of Albex and SABI. See Note 2 to the
consolidated financial statements.
Albex was incorporated in the State of Ohio on February 25 1991, as
Wirt Metal Products, Inc., relocated its operations from Elizabeth, West
Virginia to Canton, Ohio in 1996, and changed its name in 1997 to better reflect
its business of manufacturing aluminum billets and extrusions. Albex purchased
the real estate and an extrusion press in Elizabeth from Ravens prior to Pollock
purchasing a majority interest in Ravens.
SABI was founded by Pollock and incorporated in the State of Ohio on
July 10, 1989.
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MARKETS
RAVENS
The principal business of Ravens is the design and manufacture of
truck trailers, consisting of platform (flatbed) trailers, drop deck trailers,
dump trailers, and dump truck bodies. Since the late 1950s, Ravens has designed
and manufactured durable, lightweight aluminum trailers and bodies which provide
the advantage of lower operating costs plus higher legal payload capacity.
Although Ravens' products are primarily made with aluminum bodies and aluminum
chassis, Ravens also manufactures units with steel chassis. Ravens' truck
trailers are basically standardized products with a number of optional features
available; however, certain variations are often made to satisfy customers'
requirements. Ravens also manufactures truck and trailer accessories, including
tool boxes, side kits and boxes, bulkheads and other optional equipment. Ravens
sells a wide variety of after-market parts for trucks and trailers, including
parts for its own trailers. Ravens began selling aluminum utility, snowmobile,
and personal watercraft trailers in 1995 but exited this business in 1997.
The markets for Ravens' truck trailer and body product lines are
virtually all within the highway transportation industry in the U.S. with a
small amount of sales in Canada. These markets include both for-hire carriers
(commercial trucking companies and owner operators) and private carriers
(manufacturers and producers delivering their own products or commodities). Dump
trailer and body applications include construction and road building materials,
agricultural and mining products, industrial and municipal waste, and a wide
range of other bulk commodities. Platform trailers are utilized in a variety of
applications, including steel and other metals, lumber, building materials,
machinery, appliances, and industrial equipment. The overall business of Ravens
is not generally seasonal.
The U.S. market for truck trailers and related products has
historically been somewhat cyclical and has been affected by overall economic
conditions as well as regulatory changes for the highway transportation
industry.
ALBEX
Albex operates three extrusion presses (1,400 ton, 2,200 ton, and
3,000 ton) for standard and custom soft alloy aluminum extruded shapes. In 1999,
Albex shipped approximately 26 million pounds of aluminum extrusions in a market
estimated to exceed 2.9 billion pounds. Several of aluminum's physical
properties such as tensile strength, corrosion resistance, thermal conductivity,
lighter weight than steel, and scrap value for recycling are attractive to a
wide range of markets. Albex sells to manufacturers, fabricators and
distributors in the transportation, building and construction, consumer
durables, and other aluminum extrusion markets. Most sales are to customers in
the Midwestern portion of the U.S. Albex's business is not generally seasonal.
Applications in the transportation market include truck trailers and
bodies, utility trailers, recreational vehicles, and railcars. Approximately
22%, 29% and 33% of Albex's net sales in 1999, 1998 and 1997, respectively, were
to Ravens. These sales and intercompany inventory profits have been eliminated
from the consolidated financial statements.
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Primary uses in the building and construction markets are structural
beams and components for buildings, road sign supports, and components for
highway and bridge construction. Examples of consumer durables are components
for boats, sports and exercise equipment, greenhouses, and durable medical
equipment. Albex produces a wide variety of standard shapes such as angles,
bars, channels, pipes, and beams that are purchased by distributors for resale
to end users.
Albex has reduced Ravens' portion of the extrusion business from 100%
to approximately 22% by obtaining new customers. Albex constructed an aluminum
billet casting facility in 1997 in order to recycle aluminum scrap generated
internally and purchased from suppliers into aluminum billet to be used for
producing extrusions and to sell to customers. Albex completed installation of
raw material (aluminum scrap) handling equipment and a third billet casting
furnace in 1999.
SABI
SABI is a fully automated manufacturer of aluminum sign blanks and
traffic, warning, and street signs. SABI distributes its manufactured products
and purchased sign posts to a market approximating $350 million per year.
Approximately two-thirds of SABI's sales are to fabricator/dealers who purchase
aluminum blanks, cover them with reflective sheeting that is often silk
screened, and then sell the finished signs to governmental agencies.
Approximately one-third of SABI's sales are directly to governmental agencies in
the form of blanks or signs silk screened by SABI's print shop. Most sales are
to customers east of the Mississippi River. SABI's business is not generally
seasonal.
BACKLOG
Ravens' backlog of orders for new trailers amounted to approximately
$9,445,000 at May 31, 1999 compared to approximately $6,900,000 at May 31, 1998.
The backlog is expected to be completed in the current fiscal year. 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.
DISTRIBUTION AND SERVICE
RAVENS
Ravens sells and services truck trailers nationally through 65
trailer dealerships located in 31 states and 3 dealerships located in Canada.
Ravens owns trailer and parts sales branches located in Dover, Ohio. In
addition, Ravens has regional sales managers who support the dealerships and
solicit direct sales from fleet customers.
Service and maintenance on Ravens' products are performed by its
Dover, Ohio service branch. Company approved garages, repair shops, and
customers are also authorized to service its products.
Ravens assists in financing its trailer sales to customers by
guaranteeing the time payment notes of customers with acceptable credit standing
to a finance company. See Note 7 to the consolidated financial statements as to
contingent liabilities with respect to these notes.
Ravens accepts used trailers as trade-ins on sales of new trailers
and purchases used trailers for resale. Ravens generally reconditions these used
trailers when necessary and holds them for resale. Ravens does not generally
lease trailers.
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ALBEX
Albex utilizes its own sales force and manufacturer representatives
to solicit orders from distributors and other customers. Albex also toll
processes metal owned by customers into billets and extrusions.
SABI
SABI solicits sales mainly through telephone contacts with customers
and through independent sales representatives.
RAW MATERIALS
Aluminum in the form of coil, sheet, plate, primary ingot, billet and
scrap is the principal raw material used by the Company. The Company also
purchases components such as reflective sheeting, tires, wheels, axles and other
hardware items. The Company is not dependent upon any single supplier for
aluminum or other raw materials and components; however, a significant increase
in the price or an interruption in the supply of aluminum could adversely affect
the Company.
COMPETITION
RAVENS
Ravens competes nationally in the platform trailer and dump trailer
categories of the diverse and highly competitive truck trailer industry. There
are approximately 90 companies who manufacture aluminum, composite (aluminum and
steel), and steel platform and/or dump trailers. A majority of these companies
compete within local or regional areas. The Company believes that approximately
10 of these companies have larger market shares of the total platform and dump
trailer markets.
Ravens has developed product design, manufacturing, and marketing
expertise for aluminum platform and dump trailers. Aluminum trailers, compared
to composite and steel trailers, are lighter, enabling a larger payload to be
hauled, last longer, require less maintenance, and have higher resale and scrap
values. These factors are distinct advantages of aluminum trailers, but the
higher cost of aluminum compared to steel requires a larger investment by the
customer.
Ravens, particularly, is recognized as a leading manufacturer of
aluminum platform trailers. Ravens believes that there are no more than 10
manufacturers of aluminum platform trailers, of which 4 account for
approximately 90-95% of the units produced. Ravens believes, based upon 1999
estimates of units registered, that Ravens' market share was approximately 32%
and that East Manufacturing Corporation, Benson Truck Bodies, Inc., and
Reitnouer, Inc. had market shares of approximately 17%, 20% and 21%,
respectively. Ravens strives to compete based upon product performance, but
economic conditions and competition with aluminum, composite, and steel
manufacturers have caused the importance of price to increase.
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Ravens commenced production of platform trailers in its Kent, Ohio
facility in June 1995 and in October 1996 introduced the FleetHawk, a platform
trailer designed to compete more effectively against composite trailers sold to
the more cost conscious fleet customer. The FleetHawk is heavier but less
expensive than the Ravens Eclipse II Classic. Ravens believes that the higher
initial cost of the FleetHawk can be more than recovered through lighter weight
and lower operating costs than the composite trailer offered by competitors.
Ravens also introduced an aluminum flatbed truck body with the same features as
the Eclipse II Classic flatbed (platform) trailer. Ravens introduced a dropdeck
platform trailer in March 1998.
ALBEX
The aluminum extrusion industry is highly competitive with over 100
companies participating in North America. Large, vertically integrated producers
of primary aluminum such as Aluminum Company of America and Kaiser Aluminum
Corp. dominate the industry. Major independent aluminum extruders such as Easco,
Inc. operate multiple facilities on a nationwide basis. Competition is based
upon the ability to supply a quality product at a competitive price but is
primarily regional in nature due to shipping costs. Albex is able to compete
well within a 400 mile radius of its facility due to its ability to cast billet,
provide short customer order to shipment times, and provide a wide variety of
shapes.
SABI
SABI believes that it is one of the five largest companies who
together account for approximately 25% of the sign market and that its market
share approximates 5-6%. The other four companies are AmSign Corporation, Hall
Signs, Inc., Newman Traffic Signs, Inc. (Newman), and Vulcan, Inc. Newman
competes against SABI in all geographic markets, whereas the others are strong
in particular geographic areas. A large number of other manufacturers,
fabricator/dealers, and governmental sign shops account for the other 75% of the
sign market.
PATENTS AND TRADEMARKS
Ravens has a registered trademark for its swirl design finish on its
manufactured products. Ravens believes that the swirl finish is a cosmetic
feature which favorably distinguishes its trailers and bodies from competitors'
products.
EMPLOYEES
The Company currently employs approximately 495 administrative,
sales, engineering, production, and repair and service personnel. The hourly
personnel at the Ravens facility in Dover, Ohio are represented by the
International Association of Machinists and Aerospace Workers, AFL-CIO, under an
agreement which expires on April 18, 2002. The hourly production employees at
the Ravens Kent, Ohio facility are represented by the International Association
of Bridge, Structural and Ornamental Iron Workers, AFL-CIO, under an agreement
that expires on April 15, 2001. The United Steelworkers of America, AFL-CIO,
represent Albex's hourly production employees under an agreement which expires
on June 5, 2002. SABI's hourly production employees are represented under an
agreement expiring on December 31, 2000 with The Glass, Molders, Pottery,
Plastics & Allied Workers International Union, AFL-CIO.
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REGULATION
Truck trailer length, height, width, maximum capacity and other
specifications are regulated by the U.S. Government and State Governments. The
U.S. Government also regulates certain safety features incorporated in the
design of truck trailers.
ENVIRONMENTAL MATTERS
The Company's facilities are subject to the environmental laws and
regulations of the jurisdictions in which they are located. RVM believes that
the environmental standards maintained at such locations meet applicable
regulatory requirements. The Company's operations, like those of other
competitors in basic industries, have in recent years become subject to
increasingly stringent legislation and regulations with regard to protection of
human health and the environment. More rigorous policies and requirements may be
imposed in the future. Although RVM is not aware of any specific measures or
expenditures that will be required, compliance with such laws, regulations or
policies may require expenditures in the future.
ITEM 2. PROPERTIES
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Ravens leases approximately 11,000 square feet of office space for
its corporate office in Akron, Ohio.
Ravens owns a manufacturing facility on an 8 acre site in
Jacksonville, North Carolina. This facility is comprised of a prestressed
concrete building that contains approximately 43,200 square feet of fabrication
area and a concrete block building with approximately 3,000 square feet of space
for washing and painting trailers.
Ravens commenced production in June 1995 at a 22 acre site owned by
Ravens in Kent, Ohio. The building consists of approximately 95,000 square feet
primarily of steel construction.
Ravens has sufficient production capacity at the Jacksonville and
Kent facilities to meet current and projected demand for its current products.
Ravens completed construction of a 62,000 square foot steel building at its Kent
property on April 30, 1999. The building houses aluminum cut-to-length equipment
and provides space for manufacturing new products.
The branch in Dover, Ohio is housed in three buildings of cement
block construction with approximately 25,000 square feet of floor area on 3.5
acres of land. This property is utilized for trailer sales, service, and
repairs. The building contains offices, storage space, and shop space. Yard area
is utilized for storage of new and used trailers and trailers in process of
repair and maintenance. Ravens owns the land and buildings.
Ravens also owns land and buildings situated on approximately 9.2
acres adjacent to the branch facility in Dover, Ohio. From 1995 to 1997, Ravens
utilized the buildings, constructed primarily of concrete block and totaling
approximately 36,000 square feet, for manufacturing of utility, snowmobile, and
personal watercraft trailers. Ravens relocated the wholesale parts business from
Parkersburg, West Virginia in July 1998 to this property.
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Albex owns a 47 acre site in Canton, Ohio. The extrusion operation
and administrative offices are located in a 250,000 square foot building
constructed primarily of brick. A 36,000 square foot prefabricated steel
building houses the billet casting operation. RVM believes that Albex has
sufficient production capacity to meet current and projected demand for its
products.
SABI operates in a leased 64,000 square foot predominantly steel and
concrete block building in Akron, Ohio. RVM believes that SABI has sufficient
production capacity to meet current and projected demand for its products.
Certain owned property of the Company is subject to mortgages and is
collateral for lines of credit and a letter of credit. See Notes 5 and 6 to the
consolidated financial statements.
ITEM 3. LEGAL PROCEEDINGS
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The Company is involved in various claims and litigation arising in
the ordinary course of business. Management believes that the outcome of such
claims will not have a material adverse effect on the Company's financial
position and results of operations and cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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There were no matters submitted to a vote of security holders in the
quarter ended March 31, 1999.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
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MATTERS
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RVM's common stock (trading symbol "RVMI") is traded over-the-counter
and quoted on the OTC Bulletin Board and on "pink sheets" which are published
periodically. The high and low trade prices and shares traded of RVM's common
stock as reported by the OTC Bulletin Board for each quarterly period during the
last two fiscal years were as follows:
<TABLE>
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SHARES
HIGH LOW TRADED
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<S> <C> <C> <C>
1998
First quarter $ 7.000 $ 4.500 35,872
Second quarter 7.000 5.000 4,153
Third quarter 8.500 6.500 17,022
Fourth quarter 12.250 6.500 36,029
1999
First quarter 17.000 12.250 2,600
Second quarter 14.750 7.000 17,400
Third quarter 11.500 4.500 11,500
Fourth quarter 7.500 3.875 1,200
</TABLE>
Trading activity was limited. J.C. Bradford & Co. began making a
market in the first quarter of 1997 and Herzeg Heine Geduld began making a
market in the fourth quarter of 1998. The trade prices do not include retail
mark-ups, mark-downs or commissions.
RVM 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 RVM'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 Registrant's
common stock as of June 7, 1999. See Item 12.
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ITEM 6. SELECTED FINANCIAL DATA FOR THE YEARS ENDED MARCH 31
----------------------------------------------------
This information should be read in conjunction with the consolidated financial
statements and the related notes in Item 8 and Management's Discussion and
Analysis of Financial Condition and Results of Operations in Item 7.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
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<S> <C> <C> <C> <C> <C>
Net sales $ 83,035,031 $ 79,903,238 $ 61,638,221 $ 61,793,870 $ 61,333,643
Income (loss) from operations 4,215,888 4,936,300 1,960,772 (3) (274,507) 2,624,801
Unusual (expense) income items 0 0 (390,015) (4) 0 0
Income (loss) before income taxes and
accounting change 2,565,591 3,518,657 586,401 (1,354,680) 2,215,896
Cumulative effect of accounting change (2) 0 211,651 0 0 0
Net income (loss) 1,533,341 1,821,944 80,939 (1,465,653) 1,255,096
Basic and diluted earnings per share:(5)
Income before cumulative effect of
accounting change $ 0.79 $ 1.05
Cumulative effect of accounting $ 0.00 (0.11)
change
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Net income $ 0.79 $ 0.94
================ ================
Pro forma basic and diluted earnings
per share (1) $ 1.09 $ 0.19 $ (0.45) $ 0.72
Average number of shares used in
computation of per share amounts (1) 1,936,756 1,935,776 1,938,140 1,943,525 1,943,525
Cash dividends declared per common share $ 0 $ 0 $ 0 $ 0 $ 0
Total assets 48,999,890 48,348,030 38,567,375 39,211,709 31,535,760
Total long-term obligations 27,866,431 26,995,189 18,295,499 17,853,851 13,226,854
Working capital 10,655,095 10,591,297 2,181,245 2,008,050 3,005,724
Shareholders' equity (deficit) 9,422,510 7,888,169 6,056,225 5,796,700 3,164,038
</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) Net loss for Albex and SABI for the quarter ended March 31, 1997
recorded as accounting change as Albex and SABI changed their fiscal
year ends from December 31 to March 31.
(3) Includes loss of $371,768 for impairment of long-lived assets.
(4) Loss on pension settlement.
(5) Historical earnings per share information for 1995 through 1997 is not
presented because Albex and SABI were not tax paying entities in those
years and, therefore, the historical results of operations are not
indicative of the operating results of the Company on an ongoing basis.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
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LIQUIDITY AND CAPITAL RESOURCES
The Company had cash and cash equivalents of $328,490 and $846,128 at
March 31, 1999 and 1998, respectively. The Company could have borrowed
approximately $2,260,000 more on a line of credit at March 31, 1999. On
September 30, 1998, the Company and FirstMerit Bank, N.A. amended the line of
credit agreement to increase allowable borrowings from $18,000,000 to
$20,000,000 until August 31, 2000.
Ravens expects to incur capital expenditures of approximately
$400,000 in 2000 for additional improvements and equipment at the 62,000 square
foot building in Kent, Ohio. Ravens will cut aluminum sheet for its own use and
for customers at the new building. There will be space available for expanded
trailer production. These expenditures will be financed mainly by funds held by
a trustee for capital expenditures.
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. Based solely upon the
results for the year ended March 31, 1999, the pro forma calculation of the
amount of the Albex Purchase Price would be zero due to the loss and capital
expenditures incurred by Albex. The pro forma calculation of the SABI Purchase
Price, based solely upon the results for the year ended March 31, 1999, would be
$3,666,980. The Company plans to use cash generated internally and from credit
arrangements to make payments on the five year notes commencing July 1, 2000,
for the purchase of Albex and SABI.
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.
Based upon sales for early 2000 and a sales order backlog for new
trailers approximating $9,445,000 at May 31, 1999, the Company is projecting
sufficient sales to maintain profitability and meet debt covenants in 2000.
However, see the cautionary statement in the above paragraph which indicates
factors 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.
1999
Cash provided by operating activities of $3,411,718 was used mainly for capital
expenditures. Albex completed the aluminum billet casting facility and the scrap
handling equipment. Ravens used capital expenditures for construction of a new
building for the Kent, Ohio facility. Working capital increased to $10,655,095
at March 31, 1999, from $10,591,297 at March 31, 1998.
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1998
Cash provided by net borrowings was used mainly for approximately
$3,200,000 of capital expenditures by Albex for the aluminum billet casting
facility and related aluminum scrap processing equipment and for approximately
$1,200,000 by Ravens mainly for building improvements and construction of a new
building at its Kent, Ohio facility. Working capital increased to $10,591,297 at
March 31, 1998 from $2,181,245 due mainly to replacing short-term bank financing
with long-term financing and investing cash provided by net income and non-cash
items in receivables and inventories. Receivables, inventories, accounts
payable--trade, and accrued expenses increased mainly due to increased
production and sales.
1997
Net cash provided by 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 $2,181,245 at March 31, 1997, from $2,008,050 at
March 31, 1996.
RESULTS OF OPERATIONS
YEARS ENDED MARCH 31, 1999 AND 1998
Net sales increased 3.9% mainly due to increased volume of aluminum
extrusion and billet sales by Albex. Gross profit decreased 3.0% to $11,558,793
in 1999 from $11,913,663 in 1998, and gross profit margin decreased to 13.9% in
1999 from 14.9% in 1998. The cause of the consolidated gross profit percentage
decrease was the lower gross margin of Albex compared to Ravens and SABI.
Selling, general and administrative expenses increased to 8.8% from 8.7% of net
sales as selling, general and administrative expenses increased at a greater
rate than net sales. Interest expense increased mainly due to more debt
outstanding during 1999 versus 1998. See Note 8 to the consolidated financial
statements for a discussion of income taxes. See Note 1 to the consolidated
financial statements for an explanation of the cumulative effect of accounting
change.
Ravens' net sales decreased 3.8% due to weaker industry demand for
flats and dumps. Income from operations decreased by $210,580 or 4.3% due to
lower sales and plant utilization.
Albex's net sales to customers other than Ravens and SABI increased
by $5,309,953 or 33.7%. Albex cast house facility was put into service in
December 1998. Loss from operations increased by $452,546 mainly due to start-up
and learning costs.
SABI's gross profit margin increased to 17.1% from 17.0% and
operating income decreased by $75,955 or 11.6%. The decrease is attributable to
increased selling, general and administrative expenses while gross profit
remained at about the prior year's level.
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YEARS ENDED MARCH 31, 1998 AND 1997
Net sales increased 29.6% mainly due to increased volume of aluminum
extrusion and billet sales by Albex and trailer sales by Ravens. Gross profit
increased 37.7% to $11,913,663 in 1998 from $8,655,193 in 1997, and gross profit
margin increased to 14.9% in 1998 from 14.0% in 1997 mainly due to efficiencies
gained from increased production levels at Ravens' trailer facilities and
closure of the utility trailer division which generated losses in the prior
year. Selling, general and administrative expenses decreased to 8.7% from 10.3%
of net sales as net sales increased at a greater rate than selling, general and
administrative expenses. Interest expense increased mainly due to more debt
outstanding during 1998 versus 1997. See Note 8 to the consolidated financial
statements for a discussion of income taxes. See Note 1 to the consolidated
financial statements for an explanation of the cumulative effect of accounting
change.
Ravens' net sales increased 26.9% due to strong industry demand and
introduction in October 1996 of the FleetHAWK aluminum platform trailer designed
for fleet operations. Sales of FleetHAWK trailers increased to approximately
$10,200,000 in 1998 from approximately $2,900,000 in 1997. Income from
operations increased by $2,509,001 or 105.9% due to higher sales and plant
utilization and the closure of the utility trailer division.
Albex's net sales to customers other than Ravens and SABI increased
by $7,064,148 or 81.3%. Albex began producing billet for its extrusion operation
and customers during 1998 and incurred a loss from operations of $578,767 mainly
due to startup and learning costs.
SABI's gross profit margin increased to 17.0% from 14.5% and
operating income increased by $140,097 or $27.3% as SABI concentrated on more
profitable customers and lowered its costs.
INFLATION
The Company does not believe that inflation has had a material effect
on the results of operations for the periods presented because of low inflation
levels during these periods.
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 completed its assessment of all systems that could be
significantly affected by the Year 2000. Significant affected systems are
general ledger, billing, costing, inventory, and other accounting related
systems. The Company does not have any critical manufacturing equipment that
presents Year 2000 exposure to the Company. The Company has multiple suppliers
for all key components and raw materials; and therefore, the Company is not
dependent upon any third parties, other than a bank, which could materially
impact the Company's results of operations, liquidity, or capital resources.
Representatives of the bank have indicated that that its critical systems are
Year 2000 compliant. The Company has formulated a remediation and implementation
plan for each of its subsidiaries.
14
<PAGE> 15
Ravens installed a new computer in March 1998. 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 training personnel and implementing the software. The new software was
implemented at the wholesale parts operation in February 1999. The trailer sales
and retail parts branch began using the new software in March 1999. Ravens
expects to fully implement critical modules of the new software at its
manufacturing facilities prior to September 30, 1999. The costs for acquiring
and installing the new software and computer is expected to be approximately
$600,000, of which approximately $500,000 is expected to be capitalized.
Approximately $422,000 has been incurred as of March 31, 1999, of which
approximately $385,000 has been capitalized.
SABI will purchase new software and hardware. The cost is expected to
be approximately $100,000, the majority of which will be capitalized. SABI
expects to make the software decision by June 30, 1999.
Management of Ravens and SABI believe that they have effective
remediation and implementation plans. If they are unable to implement critical
modules prior to the Year 2000, date sensitive processes will be performed
manually or minor modifications can be made to the current software.
Albex's software is Year 2000 compliant.
The above expenditures are expected to be paid with internally
generated cash and with borrowings.
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. In addition, disruptions
in the economy resulting from Year 2000 issues could adversely affect the
Company.
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this Form 10-K are made pursuant to the safe
harbor provisions of Rule 175 promulgated under the Securities Act of 1933. Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those projected. Potential risks and
uncertainties include, but are not limited to: general business and economic
conditions; the financial strength of the industries which the company serves;
the competitive pricing environment within the markets which the Company serves;
labor disruptions; interruptions in the supply of raw materials and services; a
significant increase in the price of aluminum; continued availability of credit
from lenders and vendors; government regulations; obsolescence of the Company's
products and manufacturing technologies; and the inability of outside vendors to
make their computer systems Year 2000 compliant in time or the magnitude of the
Year 2000 issue being greater than presently anticipated.
15
<PAGE> 16
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
DERIVATIVE FINANCIAL INSTRUMENTS
The Company does not hold or issue derivative financial instruments for any
purposes.
INTEREST RATE EXPOSURE
Based on the Company's overall interest rate exposure as of and during the year
ended March 31, 1999, a near-term change in interest rates, within a 95%
confidence level based on historical interest rate movements, would not
materially affect the Company's consolidated financial position, results of
operations or cash flows.
16
<PAGE> 17
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
Financial Statements: PAGES
-----
Report of Independent Auditors 18
Report of Independent Accountants 19
Consolidated Balance Sheets, March 31, 1999 and 1998 20-21
Consolidated Statements of Operations
for the years ended March 31, 1999, 1998 and 1997 22
Consolidated Statements of Changes in Shareholders'
Equity for the years ended March 31, 1999, 1998 and 1997 23
Consolidated Statements of Cash Flows
for the years ended March 31, 1999, 1998 and 1997 24
Notes to Consolidated Financial Statements 25-42
Financial Statement Schedule:
II - Valuation and Qualifying Accounts and Reserves
for the years ended March 31, 1999, 1998 and 1997 43
All other schedules are omitted because they are not applicable or the
required information is presented in the financial statements or the notes
thereto.
17
<PAGE> 18
Report of Independent Auditors
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, 1999 and 1998, and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for the years then ended. Our audit also included the financial statement
schedule for the years ended March 31, 1999 and 1998, listed in Item 8. These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule 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 at March 31, 1999 and 1998, and the
consolidated results of their operations and their cash flows for the years then
ended, in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule for the years ended March 31,
1999 and 1998, when considered in relation to the basic financial statements
taken as a whole, presents fairly in all material respects the information set
forth therein.
As discussed in Note 1 to the consolidated financial statements, in fiscal 1998
two subsidiaries changed their fiscal year end to be in conformity with RVM
Industries, Inc.
/s/ ERNST & YOUNG LLP
Akron, Ohio
June 21, 1999
18
<PAGE> 19
Report of Independent Accountants
To the Shareholders and Board of Directors
RVM Industries, Inc.:
We have audited the consolidated financial statements and financial statement
schedule of RVM Industries, Inc. and subsidiaries for the year ended March 31,
1997 as listed on page 17 of this Form 10-K. These financial statements and
financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of RVM
Industries, Inc. for the year ended March 31, 1997 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information required to be included therein.
/s/ PRICEWATERHOUSECOOPERS LLP
Cleveland, Ohio
June 6, 1997
19
<PAGE> 20
RVM INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31
------------------------
1999 1998
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 328,490 $ 846,128
Receivables:
Trade, net of allowance for doubtful accounts of $107,000
and $87,000 in 1999 and 1998 10,021,593 10,174,104
Related party 157,121 222,657
Inventories 10,697,909 11,396,269
Refundable income taxes 200,997 453,815
Deferred income taxes 758,000 789,400
Other current assets 201,934 173,596
----------- -----------
Total current assets 22,366,044 24,055,969
Property, plant and equipment, net 25,791,627 21,676,483
Funds held by trustee for capital expenditures 535,583 2,277,935
Other assets 306,636 337,643
----------- -----------
Total assets $48,999,890 $48,348,030
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
20
<PAGE> 21
<TABLE>
<CAPTION>
RVM INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS, Continued
MARCH 31
------------------------
1999 1998
----------- -----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable--trade $ 6,552,072 $ 8,737,487
--related parties 167,020 59,775
Accrued expenses and liabilities:
Compensation 982,363 916,349
Product warranty 850,000 775,000
Other 1,064,042 891,828
Current portion of long-term debt--other 1,579,252 1,278,033
--related parties 516,200 806,200
----------- -----------
Total current liabilities 11,710,949 13,464,672
Note payable--bank 13,237,473 13,579,800
Long-term debt 10,211,908 9,337,439
Notes payable--related parties 2,797,050 3,023,250
Deferred income taxes 1,620,000 1,054,700
----------- -----------
Total liabilities 39,577,380 40,459,861
----------- -----------
Shareholders' equity:
Common stock, $0.01 par value; authorized shares,
3,000,000; issued and outstanding: 1,937,005 shares
at March 31, 1999, and 1,936,755 shares at March 31, 1998 19,371 19,368
Additional capital 4,784,341 4,783,344
Retained earnings 4,618,798 3,085,457
----------- -----------
Total shareholders' equity 9,422,510 7,888,169
----------- -----------
Total liabilities and shareholders' equity $48,999,890 $48,348,030
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
21
<PAGE> 22
RVM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31
------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $ 83,035,031 $ 79,903,238 $ 61,638,221
Cost of sales 71,476,238 67,989,575 52,983,028
------------ ------------ ------------
Gross profit 11,558,793 11,913,663 8,655,193
Selling general and administrative expenses 7,342,905 6,977,363 6,322,653
Impairment of long-lived assets 0 0 371,768
------------ ------------ ------------
Income from operations 4,215,888 4,936,300 1,960,772
Other income (expense):
Other income 153,440 106,810 131,074
Interest expense (1,922,974) (1,502,830) (1,061,336)
Loss on pension settlement 0 0 (390,015)
Gain (loss) on disposal of property,
plant and equipment 119,237 (21,605) (54,094)
------------ ------------ ------------
Total other expense, net (1,650,297) (1,417,625) (1,374,371)
------------ ------------ ------------
Income before income taxes and cumulative
effect of accounting change 2,565,591 3,518,675 586,401
Provision for income taxes 1,032,250 1,485,080 505,462
------------ ------------ ------------
Income before cumulative effect of
accounting change 1,533,341 2,033,595 80,939
Cumulative effect of accounting change 0 (211,651) 0
------------ ------------ ------------
Net income $ 1,533,341 $ 1,821,944 $ 80,939
============ ============ ============
Basic and diluted earnings per share:
Income before cumulative effect of accounting change $ 0.79 $ 1.05
Cumulative effect of accounting change 0.00 (0.11)
------------ ------------
Net income $ 0.79 $ 0.94
============ ============
Pro forma income data before accounting change:
Net income as reported $ 1,821,944 $ 80,939
Pro forma income tax benefit 77,691 295,937
Cumulative effect of accounting change 211,651 0
------------ ------------
Pro forma net income $ 2,111,286 $ 376,876
============ ============
Pro forma basic and diluted earnings
per share $ 1.09 $ 0.19
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
22
<PAGE> 23
RVM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
for the years ended March 31, 1999, 1998 and 1997
<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, 1996 1,943,525 $ 19,435 $ 5,812,469 $ 180,458 $ (215,662) $ 5,796,700
Net income 80,939 80,939
Other comprehensive income:
Change in unrecognized pension liability 215,662 215,662
-----------
Total comprehensive income 296,601
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
Net income 1,821,944 1,821,944
Reclassification of undistributed net
loss of S-Corporations (211,651) 211,651 0
Stock options exercised 2,500 25 9,975 10,000
--------- ----------- ----------- ----------- ---------- -----------
Balance at March 31, 1998 1,936,755 19,368 4,783,344 3,085,457 0 7,888,169
Net income 1,533,341 1,533,341
Stock options exercised 250 3 997 1,000
--------- ----------- ----------- ----------- ---------- -----------
Balance at March 31, 1999 1,937,005 $ 19,371 $ 4,784,341 $ 4,618,798 $ 0 $ 9,422,510
========= =========== =========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
23
<PAGE> 24
RVM INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED MARCH 31
-----------------------------------------------------------
1999 1998 1997
----------------- ----------------- ------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income ............................................... $ 1,533,341 $ 1,821,944 $ 80,939
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization........................... 2,043,173 1,626,913 1,376,096
Deferred income taxes................................... 596,700 451,300 (28,340)
Increase (decrease) in accrued product warranty......... 75,000 235,000 55,000
Increase (decrease) in allowance for doubtful
accounts.............................................. 20,000 (25,000) 9,000
Cumulative effect of accounting change.................. 0 205,244 0
Loss (gain) on disposition of property, plant and
equipment............................................. (119,237) 21,605 54,094
Impairment of long-lived assets......................... 0 0 371,768
Increase (decrease) in cash from changes in:
Receivables --trade..................................... 132,511 (3,643,095) 413,488
--related party............................. 65,537 (102,649) (96,111)
Inventories............................................. 698,360 (2,719,109) 645,715
Other current assets.................................... (28,338) 38,052 38,675
Other assets............................................ (18,204) (11,355) 7,128
Accounts payable --trade................................ (2,185,414) 2,585,563 (1,017,325)
--related parties...................... 107,245 (322,563) 289,170
Refundable and accrued income taxes..................... 252,816 (548,565) 125,538
Accrued expenses and other current liabilities.......... 238,228 124,949 189,190
Other long-term liabilities............................. 0 0 (275,293)
Unrecognized pension liability.......................... 0 0 215,662
----------------- ----------------- ------------------
Net cash provided by (used in) operating activities..... 3,411,718 (261,766) 2,454,394
----------------- ----------------- ------------------
Cash flows from investing activities:
Capital expenditures...................................... (6,618,179) (4,448,996) (3,820,601)
Grants (expended) received for capital expenditures....... 0 0 (375,000)
Proceeds from disposal of property, plant
and equipment........................................... 628,310 700 304,731
Investment of proceeds from long-term debt with trustees
and income earned on investment of proceeds............. (64,507) (125,856) (166,957)
Sale of investments and release of funds held
by trustees............................................. 1,806,859 610,163 1,928,062
----------------- ----------------- ------------------
Net cash provided by (used in) investing activities..... (4,247,517) (3,963,989) (2,129,765)
----------------- ----------------- ------------------
Cash flows from financing activities:
Payments on long-term debt................................ (1,379,442) (1,340,031) (1,585,217)
Proceeds from (payments on) notes payable--bank, net....... (342,327) 3,599,296 (1,354,925)
Proceeds from notes and accounts payable to
related parties......................................... 0 0 2,900,000
Payments on notes payable to related parties.............. (516,200) (201,550) (250,000)
Proceeds from long-term debt, net of issuance costs....... 2,555,130 2,535,596 0
Purchase of treasury stock................................ 0 0 (37,076)
Contributed capital....................................... 0 0 0
Proceeds from stock options exercised..................... 1,000 10,000 0
----------------- ----------------- ------------------
Net cash provided by (used in) financing activities..... 318,161 4,603,311 (327,218)
----------------- ----------------- ------------------
Net increase (decrease) in cash and cash equivalents......... (517,638) 377,556 (2,589)
Cash and cash equivalents at beginning of year............... 846,128 468,572 471,161
----------------- ----------------- ------------------
Cash and cash equivalents at end of year..................... $ 328,490 $ 846,128 $ 468,572
================= ================= ==================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
24
<PAGE> 25
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
----------
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. In
accordance with code section 368 of the Internal Revenue Code, for tax
purposes, the reorganization of RVM and Ravens represented a tax free
exchange. 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 non-public 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 was a business combination by entities
under the common control of Jacob Pollock (Pollock). The financial
statements of prior years were 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 wholly owned 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 Indiana (see Note 20). 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. Albex began
production of aluminum billet in 1998 for its own use and for
customers.
SABI manufactures and sells aluminum blank and finished traffic control
signs to fabricators, distributors, and governmental agencies located
throughout the U.S. but primarily east of the Mississippi River. Its
production facility is in Akron, Ohio.
25
<PAGE> 26
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----------
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
Continued:
FISCAL YEAR AND ACCOUNTING CHANGE:
The fiscal year of RVM and Ravens ends on March 31. References to
1999, 1998, etc. are for the years ended March 31, 1999, 1998, etc.,
respectively. 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 has been recorded as
the cumulative effect of an accounting change reflecting the net loss
for Albex and SABI for the quarter ended March 31, 1997. If the fiscal
year ends had changed effective April 1, 1996, net income for the year
ended March 31, 1997, would have decreased by $97,796. Their financial
statements for the year ended December 31, 1996, were included in
these consolidated statements because undue expense and effort would
have been required to prepare audited financial statements through
March 31, 1997. Significant intervening transactions and events
between January 1 and March 31, 1997, have been included in the
consolidated financial statements or disclosed in the notes to the
financial statements.
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 valued at the lower of cost or market. The cost of
approximately 55% and 57% of the inventories in 1999 and 1998,
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) and weighted average methods of
valuation.
26
<PAGE> 27
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----------
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
Continued:
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:
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
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 manufactured according to
sales contracts are recorded when the trailers are available for
pick-up or delivery as ordered and invoiced. Trailers manufactured to
customer specifications have no right of return or exchange
privileges. 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.
27
<PAGE> 28
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
Continued:
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. 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 1999 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 (Pollock), the owner
of all of the shares of Albex and SABI and an officer, director, and the
majority shareholder (holding 87.16% of the outstanding common stock as
of March 31, 1997) of RVM.
The purchase price of the Albex and SABI shares will be 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 (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. Based
solely upon the results for the year ended March 31, 1999, the pro forma
calculation of the amount of the Albex Purchase Price would be zero due
to the loss and capital expenditures incurred by Albex. The pro forma
calculation of the SABI Purchase Price, based solely upon the results for
the year ended March 31, 1999, would be $3,666,980.
The Albex and SABI Purchase Prices 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. Payments of principal only will be
due on July 1, 2000, and payments of principal and interest will be due
on August 1, 2000, and on the first day of each month thereafter.
Payments on these notes are subordinated to the repayment of
substantially all other notes payable and long-term debt.
28
<PAGE> 29
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----------
3. INVENTORIES:
<TABLE>
<CAPTION>
March 31 1999 1998
------------- ------------
<S> <C> <C>
Raw materials $ 5,782,364 $ 7,233,712
Work in process 2,160,389 1,202,107
Finished goods 2,755,156 2,960,450
----------- -----------
$10,697,909 $11,396,269
=========== ===========
</TABLE>
The reserve to reduce the carrying value of inventories from current
cost to the LIFO basis amounted to approximately $1,853,000 and
$1,996,000 at March 31, 1999 and 1998, respectively.
4. PROPERTY, PLANT AND EQUIPMENT:
<TABLE>
<CAPTION>
March 31 1999 1998
----------- -----------
<S> <C> <C>
Buildings and improvements $ 8,185,032 $ 8,029,924
Machinery and equipment 19,948,895 18,109,610
Office equipment 1,145,277 1,122,296
Vehicles 826,610 559,935
Construction in progress 4,213,055 1,001,126
----------- -----------
34,318,869 28,822,891
Less accumulation depreciation
and amortization 8,856,454 7,532,320
----------- -----------
25,462,415 21,290,571
Land 329,212 385,912
----------- -----------
$25,791,627 $21,676,483
=========== ===========
</TABLE>
Approximately $2,800,000, $3,200,000 and $3,390,000 of capital
expenditures were incurred in 1999, 1998 and 1997, respectively, for a
new production facility and casting house in Canton, Ohio. These capital
expenditures include capitalized interest of $35,734, $66,480 and $10,440
in 1999, 1998 and 1997, 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 at the Canton, Ohio facility. The
terms of the grant also require Albex to employ a specified number of
employees at this facility.
29
<PAGE> 30
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----------
4. PROPERTY, PLANT AND EQUIPMENT, Continued:
Approximately $2,642,000, $705,000 and $233,000 of capital expenditures
were incurred in 1999, 1998 and 1997, respectively, for a new production
facility in Kent, Ohio. These capital expenditures include capitalized
interest expense net of capitalized interest income of $113,426, $25,269,
and $58,951 in 1999, 1998 and 1997, respectively.
Rent expense was approximately $219,000, $172,000 and $238,000 in 1999,
1998 and 1997, respectively.
5. NOTE PAYABLE--BANK:
On September 30, 1998, the Company entered into a line of credit
agreement with FirstMerit Bank, N.A. (FM) replacing its existing
agreements. The agreement provides for borrowings up to $20,000,000 based
on eligible accounts receivable and inventories expiring on August 31,
2000. Interest is at FM's prime rate (7.75% at March 31, 1999) minus
1/4%. The agreement is collateralized by accounts receivable, inventory,
equipment, cash, intangibles and certain real estate. 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 was not in compliance with the cash flow
coverage covenant for the year ended March 31, 1999, and on June 21,
1999, the Company received a waiver of such noncompliance from the
lender. The Company expects to be in compliance with this covenant for
the year ending March 31, 2000. The Company could have borrowed
approximately $2,260,000 more than the amount owed FM at March 31, 1999.
The Company owed $13,237,473 under this agreement at March 31, 1999.
On September 30, 1997, the Company and FM entered into a $5,000,000 fixed
asset term loan agreement for the financing of certain existing and to be
acquired fixed assets. Interest is at FM's prime rate. Repayment terms
are interest only for two years and principal plus interest for seven
years. The Company owed $5,000,000 under this agreement at March 31,
1999.
Jacob Pollock provided a $2,500,000 guarantee on the above loan
agreements.
At March 31, 1998, the Company owed $13,579,800 to FM under several
current and long-term lines of credit at interest rates ranging from
FM's prime rate (8.5% at March 31, 1998) minus 1/4%.
30
<PAGE> 31
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----------
6. LONG-TERM DEBT:
<TABLE>
<CAPTION>
March 31 1999 1998
------------------- ------------------
<S> <C> <C>
City of Kent, Ohio (a) $ 3,550,000 $ 4,000,000
Department of Development of the State of Ohio (b) 1,480,141 1,887,230
State of Ohio Economic Development Revenue Bonds (c) 1,235,000 1,545,000
Albex and SABI purchase prices (d)
Fixed asset term loan agreement (see Note 5) 5,000,000 2,444,869
7% subordinated debentures, payable in 2004, net of
unamortized discount of $37,689 and $47,553 412,011 433,747
Other 114,008 304,626
------------------- ------------------
11,791,160 10,615,472
Less current portion 1,579,252 1,278,033
------------------- ------------------
$ 10,211,908 $ 9,337,439
=================== ==================
</TABLE>
(a) City of Kent, Ohio Variable Rate Demand Industrial Development
Revenue Bonds due in annual principal payments of $450,000 in 2000
and 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 (3.3% and 4.0% at March 31, 1999 and
1998, respectively). Payment to bondholders is guaranteed by a
letter of credit in an amount equal to outstanding principal plus
specified interest ($3,620,827 at March 31, 1999) expiring
December 15, 1999, issued by FirstMerit Bank, N.A. 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 in Note 5. Proceeds from the
loan agreement are held by a trustee and released to Ravens for
approved capital expenditures at the Kent facility. $535,583 and
$2,277,935 held by the trustee at March 31, 1999 and 1998,
respectively, were invested in short-term commercial paper and a
money market fund.
(b) Chapter 166 Direct Loan payable to the Department of Development
of the State of Ohio, due in monthly installments of $35,566
including interest at 3.0%. The loan matures December 2002 and is
collateralized by substantially all machinery and equipment of
Albex, the corporate guarantees of Ravens and SABI, and the
personal guarantees of Jacob Pollock, Richard D. Pollock and
Gertrude Pollock, the wife of Jacob Pollock.
31
<PAGE> 32
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----------
6. LONG-TERM DEBT, Continued:
(c) State of Ohio Economic Development Revenue Bonds are subject to a
mandatory semiannual redemption schedule which requires monthly
escrow payments of approximately $33,000 including interest at 5.6%.
The bonds mature June 1, 2002, and are collateralized by
substantially all machinery and equipment of Albex, the corporate
guarantees of Ravens and SABI, and the personal guarantees of Jacob
Pollock, Richard D. Pollock and Gertrude Pollock, the wife of Jacob
Pollock.
The Chapter 166 Direct Loan and the State of Ohio Economic
Development Revenue Bonds contain covenants which limit Albex in
certain areas including, among others, total long-term debt to
tangible net worth, minimum tangible net worth and dividend payments.
The State of Ohio has agreed to substitute RVM's financial statements
in place of Albex's for the purpose of the financial covenant
calculations.
(d) See Note 2.
Maturities for long-term debt are:
<TABLE>
<CAPTION>
Debt Listed Above Albex and SABI Note Payable--Bank
Notes (1) (2) Total
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2000 $ 1,579,252 $ 516,200 $ 0 $ 2,095,452
2001 1,942,928 806,200 13,237,473 15,986,601
2002 2,004,885 806,200 0 2,811,085
2003 1,702,081 749,650 0 2,451,731
2004 1,626,299 435,000 0 2,061,299
Thereafter 2,935,715 0 0 2,935,715
------------------- -------------------- -------------------- --------------------
$ 11,791,160 $ 3,313,250 $ 13,237,473 $ 28,341,883
=================== ==================== ==================== ====================
</TABLE>
(1) See Note 12.
(2) See Note 5.
32
<PAGE> 33
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----------
7. COMMITMENTS AND CONTINGENT LIABILITIES:
The Company is involved in various claims and litigation arising in the
ordinary course of business. Management believes that the outcome of such
claims will not have a material adverse effect on the Company's financial
position and results of operations and cash flows.
At March 31, 1999 and 1998, Ravens was contingently liable as guarantor
on certain sales contracts of customers in the amount of approximately
$568,000 and $552,000, 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.
See Note 2.
8. INCOME TAXES:
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ------------------ ------------------
<S> <C> <C> <C>
Current:
Federal $ 401,867 $ 945,527 $ 499,639
State 33,683 88,253 34,163
------------------ ------------------ ------------------
435,550 1,033,780 533,802
Deferred 596,700 451,300 (28,340)
------------------ ------------------ ------------------
$ 1,032,250 $ 1,485,080 $ 505,462
================== ================== ==================
</TABLE>
33
<PAGE> 34
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----------
8. INCOME TAXES, Continued:
The sources of temporary differences which make up the deferred tax
balances are as follows:
<TABLE>
<CAPTION>
March 31 1999 1998
------------------- ------------------
<S> <C> <C>
Deferred income tax assets:
Warranty reserve $ 321,000 $ 292,900
Vacation 110,000 83,900
Deferred interest and amortization of premium or
discount on debt 85,000 70,300
Allowance for doubtful accounts 36,000 32,700
Inventory 190,000 162,600
NOL carryforward 57,000 65,300
Other non-deductible accruals 123,000 111,200
Other 0 92,400
------------------- ------------------
Total deferred tax assets 922,000 911,300
Deferred tax liabilities:
Depreciable property (1,729,000) (1,155,700)
Pension (14,000) (10,100)
Other (41,000) (10,800)
------------------- ------------------
Total deferred tax liabilities (1,784,000) (1,176,600)
------------------- ------------------
Net deferred income taxes $ (862,000) $ (265,300)
=================== ==================
</TABLE>
At March 31, 1999, the Company had available net operating loss
carryforwards of approximately $168,000 for federal income tax purposes,
which are subject to limitations based on Ravens' ability to generate
future taxable income. These loss carryforwards expire in years through
2006.
34
<PAGE> 35
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----------
8. INCOME TAXES, Continued:
A reconciliation of the federal statutory income tax rate to the
effective rate follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------------------------- --------------------------- ----------------------------
Amount Percent Amount Percent Amount Percent
-------------- ------------- ------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Statutory amount and rate $ 872,301 34.0% $ 1,196,350 34.0% $ 486,190 34.0%
Effect of:
State taxes (net of
utilization of tax loss 99,538 3.9 110,964 3.1 19,714 1.4
carryforwards)
Conversion from S
Corporation to C
Corporation for Albex
and SABI 0 0.0 261,000 7.4 0 0.0
Non-deductible expenses 11,014 0.4 9,575 0.3 5,917 0.4
Other 49,397 1.9 (92,809) (2.6) (6,359) (0.5)
------------ ---- ------------ ---- ---------- ----
$ 1,032,250 40.2% $ 1,485,080 42.2% $ 505,462 35.3%
============ ==== ============ ==== ========== ====
</TABLE>
Albex and SABI (See Note 2) had 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 are no longer
S-corporations and are subject to 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.
The unaudited pro forma income tax benefit of $77,691 presented for 1998
represents the pro forma income tax benefit related to the net loss
incurred by Albex and SABI for the quarter ended March 31, 1997, at an
effective tax rate of 36.7% for that period. Unaudited pro forma income
tax (benefit) for the year ended March 31, 1997, is as follows:
<TABLE>
<CAPTION>
Unaudited
------------------
Deferred provision (benefit):
<S> <C>
Federal $ (250,036)
State (45,901)
------------------
Total $ (295,937)
==================
</TABLE>
35
<PAGE> 36
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----------
8. INCOME TAXES, Continued:
The differences between unaudited pro forma income taxes at the federal
statutory income tax rate and unaudited pro forma income taxes for the
year ended March 31, 1997, are as follows:
<TABLE>
<CAPTION>
Unaudited
-------------------------------------
Amount Percent
----------------- ----------------
<S> <C> <C>
Statutory amount and rate $ (275,787) (34.0)%
Effect of:
State taxes (net of utilization of tax
loss carryforwards) (22,415) (2.7)
Other 2,265 0.3
----------------- ----------------
$ (295,937) (36.4)%
================= ================
</TABLE>
9. RETIREMENT PLANS:
RVM has defined contribution plans covering salaried and non-union hourly
employees of the Company. The purpose of the plans is 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 was $94,669,
$57,451 and $28,110 for 1999, 1998 and 1997, respectively.
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 $20,002,
$16,406 and $19,020 in 1999, 1998 and 1997, respectively. These
contributions are determined in accordance with the provisions of a
negotiated labor contract and generally are based on the amount of wages
earned. Information as to SABI's portion of the accumulated plan
benefits, plan net assets and unfunded vested benefits, if any, is not
determinable.
Ravens has a defined benefit pension plan covering approximately 30
hourly employees at its service facility in Dover, Ohio. The plan
provides benefits of specified amounts for each year of service. Plan
assets at fair value exceeded the projected benefit obligation at March
31, 1999 and 1998, and prepaid pension cost recognized in the balance
sheet amounted to $36,685 and $26,769, respectively. Net pension cost for
this plan was $11,751, $21,882 and $39,304 for 1999, 1998 and 1997,
respectively.
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 in 1997 for the termination of
the plan.
36
<PAGE> 37
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----------
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, 1999. 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 PER SHARE:
Earnings per share is computed in accordance with Statement of Financial
Accounting Standards No. 128, Earnings per Share, which requires the
presentation of basic earnings per share and diluted earnings per share
reflecting the potential dilution that could occur if all options or
contracts to issue common stock were exercised or converted. Basic
earnings per share is based on net income divided by the weighted average
number of common shares outstanding. Weighted average number of common
shares outstanding was 1,936,756, 1,935,776 and 1,938,140 in 1999, 1998
and 1997, respectively. Basic earnings per share for the Company is the
same as diluted earnings per share.
Historical earnings per share information for 1997 is not presented
because Albex and SABI were not tax paying entities in those years and,
therefore, the historical results of operations are not indicative of the
operating results of the Company on an ongoing basis.
12. RELATED PARTY TRANSACTIONS:
Albex is the obligor on a note payable to Jacob 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). The Notes require
payment 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 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 is due
on the first day of each month 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. An annual principal payment of $516,200 is due in
2000, $806,200 is due in 2001 and 2002, $749,650 is due in 2003 and
$435,000 is due in 2004. Payments with respect to these Notes are
subordinated to the repayment of substantially all other notes payable
and long-term debt.
37
<PAGE> 38
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----------
12. RELATED PARTY TRANSACTIONS, Continued:
J. Pollock & Company, wholly owned by Jacob Pollock, purchases materials
and provides or contracts for certain administrative services for the
Company and charges the Company at its cost. Such transactions totaled
$10,171, $634,151 and $348,417 in 1999, 1998 and 1997, respectively. J.
Pollock & Company provided management services to the Company under
agreements which terminated on December 31, 1997. The Company paid $-0-,
$330,000 and $428,000 in 1999, 1998 and 1997, respectively, for these
services.
The Company leases office and manufacturing space from a corporation in
which Richard Pollock and Bruce Pollock are shareholders. The lease is
for five years expiring December 31, 1999 at a monthly base rent of
$9,300 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
$139,000, $116,000 and $114,000 in 1999, 1998 and 1997, respectively.
Richard Pollock and Bruce Pollock are sons of Jacob Pollock.
Since September 1, 1997, the Company has leased office space from Pollock
Real Estate, Ltd., of which Pollock and his wife are members. The lease
is for three years expiring August 31, 2000 at a monthly base rent of
$5,500 plus the Company's share of utilities, real estate taxes,
insurance, and property maintenance.
The Company paid $85,805 and $44,192 in 1999 and 1998, respectively.
The Company purchased aluminum materials from The Aluminum Warehouse,
Inc., of which Richard Pollock and his family are shareholders, totaling
$91,560, $114,356 and $87,918 in 1999, 1998 and 1997, respectively. The
Company sold aluminum extrusions to The Aluminum Warehouse, Inc. totaling
$853,747, $1,306,480 and $409,434 in 1999, 1998 and 1997, respectively.
$157,121 and $222,657 was receivable at March 31, 1999 and 1998.
The Company hired temporary personnel from Flex-Team Incorporated, wholly
owned by the Jacob Pollock Irrevocable Trust, of which Richard Pollock
and other family members are beneficiaries, totaling $516,485, $160,518
and $245,233 in 1999, 1998 and 1997, respectively. $93,514 and $47,993
was owed at March 31, 1999 and 1998, respectively.
See Note 2 regarding acquisitions from and notes payable to related
parties.
Management believes that the terms of the above transactions are
comparable to those which would have been obtainable from unaffiliated
sources.
38
<PAGE> 39
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----------
13. STOCK OPTIONS:
RVM's 1993 Stock Option Plan (Plan) provides for the granting of options
to acquire up to 150,000 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. At March 31, 1999, there were
107,979 shares available to be optioned under the Plan. The Company has
selected the disclosure-only option of Statement of Financial Accounting
Standards No. 123, Accounting for stock-based Compensation (SFAS 123). In
accordance with SFAS 123, RVM accounts for its Stock Option Plan in
accordance with Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees (APB 25), and related Interpretations.
Under APB 25, because the exercise price of the Company's employee stock
options equals or exceeds the market price of the underlying stock on the
date of grant, no compensation expense is recognized.
Pro forma information regarding net income and earnings per share is
required by SFAS 123, which also requires that the information be
determined as if the Company has accounted for its employee stock options
granted subsequent to March 31, 1995 under the fair value method of that
Statement. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 1998: risk-free interest rate of 5.7%; a
dividend yield of 0%; volatility factor of the expected market price of
the Company's common stock of 30%; and a weighted-average expected life
of the options of four years. The option valuation model requires the
input of highly subjective assumptions, primarily stock price volatility,
changes in which can materially affect the fair value estimate. The
weighted-average fair values of stock options granted during 1998 was
$3.85.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. There
were no options granted by the Company in 1999. The options granted by
the Company in 1998 were fully vested, and therefore the total estimated
fair value of the options was recognized as expense in the 1998 amounts
below. The Company's pro forma information follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------- --------------- -----------
<S> <C> <C> <C>
Net income (loss):
As reported $ 1,533,341 $ 1,821,944 $ 80,939
Pro forma 1,533,341 1,698,662 80,939
Earnings (loss) per share:
As reported $ 0.79 $ 0.94 $ 0.19
Pro forma 0.79 0.88 0.19
</TABLE>
39
<PAGE> 40
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----------
13. STOCK OPTIONS, Continued:
A summary of the Company's stock option activity and related information
for the years ended March 31 follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------- ---------------------- ---------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------ ------- ------ ------- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of 39,521 $ 10.60 10,000 $ 4.00 10,000 $ 4.00
year
Granted 0 32,021 12.15 0
Exercised (250) 4.00 (2,500) 4.00 0
Forfeited or cancelled 0 0 0
------ ------ ------
Outstanding and exercisable at
end of year 39,271 $ 10.65 39,521 $ 10.60 10,000 $ 4.00
====== ======= ====== ======= ====== ======
</TABLE>
The following table summarizes information about the Company's stock
options outstanding at March 31, 1999:
<TABLE>
<CAPTION>
Weighted- Weighted-Average
Options Options Average Remaining Contractual
Grant Date Outstanding Exercisable Exercise Price Life (Years)
---------- ----------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
1998 32,021 32,021 $12.15 4
1995 7,250 7,250 (a) 4.00 0
</TABLE>
(a) In April 1999, 500 of these options were exercised and the remainder
expired.
14. ADVERTISING COSTS:
Advertising costs included in selling, general and administrative expense
were $220,790, $229,455 and $198,653 in 1999, 1998 and 1997,
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.
40
<PAGE> 41
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----------
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, 1999 and
1998, 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 (SFAS 121), 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 (net of amounts capitalized):
1999--$1,844,181; 1998--$1,589,500; and 1997--$1,083,960.
(B) Cash payments for income taxes: 1999--$174,563;
1998--$1,632,550 and 1997--$408,264.
41
<PAGE> 42
RVM INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS, Continued
----------
19. BUSINESS SEGMENTS:
Each of RVM's subsidiaries operates in one business segment. See Note 1
for a description of the segments. The Company's three reportable
business segments are managed separately based on fundamental differences
in their operations. Intersegment sales generally are priced at
prevailing market prices.
<TABLE>
<CAPTION>
1999 RAVENS ALBEX SABI ELIMINATIONS CONSOLIDATION
- -------------------------------- -------------- ------------ -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Sales to customers $ 50,814,218 $21,068,053 $11,152,760 $ 0 $83,035,031
Intersegment sales 0 6,228,173 461 (6,228,634) 0
------------ ----------- ----------- ----------- -----------
Net sales $ 50,814,218 $27,296,226 $11,153,221 $(6,228,634) $83,035,031
============ =========== =========== =========== ===========
Income (loss) from operations $ 4,667,478 $(1,031,313) $ 577,180 $ 2,543 $ 4,215,888
Depreciation and amortization 605,085 1,274,393 163,695 0 2,043,173
Capital expenditures 3,730,536 2,821,325 66,318 0 6,618,179
Assets 23,228,234 22,868,738 3,381,966 (479,048) 48,999,890
1998
- --------------------------------
Sales to customers $ 52,843,370 $15,758,100 $11,301,768 $ 0 $79,903,238
Intersegment sales 0 6,813,863 855 (6,814,718) 0
------------ ----------- ----------- ----------- -----------
Net sales $ 52,843,370 $22,571,963 $11,302,623 $(6,814,718) $79,903,238
============ =========== =========== =========== ===========
Income (loss) from operations $ 4,878,058 $ (578,767) $ 653,135 $ (16,126) $ 4,936,300
Depreciation and amortization 543,623 930,419 152,871 0 1,626,913
Capital expenditures 1,164,343 3,164,284 120,369 0 4,448,996
Assets 23,769,518 20,963,376 3,951,223 (336,087) 48,348,030
1997
- --------------------------------
Sales to customers $ 41,652,421 $ 8,693,952 $11,291,848 $ 0 $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 $ (896,899) $ 513,038 $ (24,424) $ 1,960,772
Depreciation and amortization 556,126 653,853 166,117 0 1,376,096
Capital expenditures 372,325 3,391,541 56,735 0 3,820,601
Assets 19,908,167 15,103,090 3,556,118 0 38,567,375
</TABLE>
20. SUBSEQUENT EVENT (UNAUDITED):
On April 8, 1999, the Company purchased the equipment and inventory of
a steel trailer manufacturing plant located in Knox, Indiana for
approximately $1.2 million.
42
<PAGE> 43
RVM INDUSTRIES, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
for the years ended March 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ------------------------------------ -------------- ------------- -------------
-------------------------------
Additions
-------------------------------
Balance at Charged to Charged to Balance at
Beginning of Cost and Other Deductions End of
Description Period Expenses Accounts (A) Period
- ------------------------------------ -------------- -------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
Period ended:
March 31, 1999 $ 87,000 $ 38,718 $ 0 $ 18,718 $ 107,000
March 31, 1998 112,000 123,480 0 148,480 87,000
March 31, 1997 103,000 154,630 0 145,630 112,000
</TABLE>
(A) Uncollectible accounts written off, net of recoveries.
43
<PAGE> 44
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
-----------------------------------------------------------
AND FINANCIAL DISCLOSURE
------------------------
At a meeting held on December 15, 1997, the Board of Directors of
the Company approved the engagement of Ernst & Young LLP as its
independent auditors for the fiscal year ending March 31, 1998, to
replace PricewaterhouseCoopers LLP (formerly Coopers & Lybrand
L.L.P.), who were dismissed as auditors of the Company. The Audit
Committee of the Board of Directors approved the change in auditors
on December 15, 1997.
The report of Coopers & Lybrand L.L.P. on the Company's financial
statements for the year ended March 31, 1997, did not contain an
adverse opinion or a disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope, or accounting principles.
In connection with the audits of the Company's financial statements
for the fiscal year ended March 31, 1997, there were no
disagreements with PricewaterhouseCoopers LLP on any matters of
accounting principles or practices, financial statement disclosure,
or auditing scope and procedures which, if not resolved to the
satisfaction of PricewaterhouseCoopers LLP, would have caused
PricewaterhouseCoopers LLP to make reference to the matter in their
report.
44
<PAGE> 45
Part III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The directors and executive officers of the Registrant are listed
below:
<TABLE>
<CAPTION>
Name Age Since Position
- ---------------------------- --- --------------------- -------------------------------
<S> <C> <C> <C>
Jacob Pollock 74 May 3, 1991 Chairman of the Board, Chief
(term expires in 1999) Executive Officer, and Treasurer
Nicholas T. George 54 May 3, 1991 Secretary and Director
(term expires in 2000)
Richard D. Pollock 43 May 3, 1991 President and Director
(term expires in 2001)
C. Stephen Clegg 48 May 3, 1991 Director
(term expires in 2001)
Louis N. Strike 52 September 9, 1998 Director
(term expires in 2000)
Lowell P. Morgan 64 July 1, 1991 President of Ravens, Inc.
</TABLE>
All years in Item 10 refer to calendar years.
Mr. Jacob Pollock has been Chairman of the Board of Directors,
Chief Executive Officer, and Treasurer since May 3, 1991, the date he
acquired controlling interest in the Company. He has been Chairman of
the Board and President of J. Pollock & Company, a company principally
engaged in the sale of aluminum, private investment, and consulting,
since April 1989. He was Chief Executive Officer of Barmet Aluminum
Corporation, an aluminum company, from 1949-1989. He serves as a
Director of Mid-West Spring Manufacturing Company, Inc., Diamond Home
Services, Inc. and several nonpublic companies.
Mr. George, an Attorney, was President of the law firm of Nicholas
T. George & Associates from 1979 to 1997. He joined the law firm of
Buckingham, Doolittle & Burroughs, LLP as a partner in 1997.
Mr. Richard Pollock has served as President of RVM since March 31,
1997, President of Albex since May 1991 and as a Vice President of J.
Pollock & Company since February 1990. Prior to joining J. Pollock &
Company, he was employed as a Vice President and then President of
Barmet Aluminum Corporation for more than five years.
Richard Pollock is the son of Jacob Pollock.
45
<PAGE> 46
Mr. Clegg has served as Chairman of the Board of Directors and
Chief Executive Officer of Diamond Home Services, Inc. since February
1996. He has served as Chairman of the Board of Directors of Mid-West
Spring Manufacturing Company, Inc. and Globe Building Materials, Inc.
for more than five years, and he is a Director of Birmingham Steel
Corporation.
Mr. Strike has served as Managing Director and Partner of
Ballenger, Strike and Associates LLP, management consultants, from
January 1996 to present; and President, CINPAC, Inc., a food processing
and packaging contractor, from April 1992 to December 1995.
Mr. Morgan had previously been employed by the Company from 1959
to 1983. During his former tenure with the Company, he 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 of his
former employers manufactured truck trailers.
Officers serve at the pleasure of the Board of Directors
without specific terms of office.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of copies of Forms 3, 4 and 5 furnished
to RVM during or with respect to the fiscal year ended March 31, 1999,
RVM is not aware of any person subject to Section 16 of the Securities
Exchange Act of 1934 with respect to RVM that failed to file on a timely
basis reports required by Section 16(a) during the most recent fiscal
year or prior fiscal years.
46
<PAGE> 47
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The following table discloses compensation in excess of $100,000
awarded to, earned by or paid to any executive officer:
<TABLE>
<CAPTION>
Name and Principal Fiscal All Other
Position Year Salary Bonus Compensation(1)
------------------ -------- -------- ------- ---------------
<S> <C> <C> <C> <C>
Jacob Pollock (2)
Chief Executive Officer 1999 $ 125,000 $ 0 $ 0
1998 127,600 0 0
Richard D. Pollock (2)
President 1999 187,748 0 3,857
1998 183,700 0 5,511
Lowell P. Morgan
President, Ravens, Inc. 1999 90,848 20,732 1,511
1998 82,944 21,580 1,045
1997 82,975 20,836 1,038
</TABLE>
(1) Amount contributed to the named person's 401(k) plan account.
(2) Jacob Pollock and Richard D. Pollock did not receive any cash or
noncash compensation from the Company until January 1, 1998. The Company
paid $-0-, $330,000 and $428,000 in 1999, 1998 and 1997, respectively,
to J. Pollock & Company for general management services. The
compensation disclosed was paid by the Company from January 1, 1998 to
March 31, 1998, and by J. Pollock & Company from April 1, 1997 to
December 31, 1997.
In 1993, RVM adopted a Stock Option Plan which provides for the
granting of options to acquire up to 50,000 shares of its 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% (110% in the case of a person owning more than 10% of the Company's
stock) 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.
Directors of RVM are paid $1,000 for Board of Directors meetings
which they attend. Additional compensation is not paid for committee
meetings. In 1995, 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 were exercised prior to
expiration. In 1998, Mr. Clegg and Mr. George were each granted options
to purchase 1,000 shares of common stock. The options have an exercise
price of $12.00 per share and expire on March 27, 2003.
47
<PAGE> 48
The following table discloses information on options for the named
executive officers:
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values
------------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at March 31, 1999 (#) March 31, 1999 ($)
----------------------------- ---------------------------
Shares
Acquired on Value
Name Exercise (#) Realized Exercisable Unexercisable Exercisable Unexercisable
------------------- ------------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Jacob Pollock 4,000 0 $ 0 $ 0
Richard D. Pollock 4,625 0 0 0
Lowell P. Morgan 4,700 0 0 0
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of RVM'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 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, 1994, in the common stock of RVM,
the NASDAQ Composite Index, and an index of peer companies (peer group)
selected by RVM. The peer group consists of the following companies:
Dorsey Trailers, Inc., Featherlite Mfg., Inc., Miller Industries,
Inc./TN, Wabash National Corp., Supreme Industries, Inc., Easco, Inc.,
International Aluminum Corporation, and Tredegar Industries, Inc.
48
<PAGE> 49
RVM believes that the large returns in 1998 and 1997 are due to
J.C. Bradford & Co. making a market in RVM's common stock beginning in
the first quarter of 1997 and Herzeg Heine Geduld making a market
beginning in the fourth quarter of 1998. In addition, the Company
retained investor relations consultants in January 1998. Prior to May
1996, RVM's common stock did not actively trade, but a market maker
quoted bid prices and traded shares infrequently. The decrease in 1999
may be attributed to lower profits and the low volume of trades.
<TABLE>
<CAPTION>
RVM NASDAQ
Industries, Composite Peer
Inc. Index Group
----------- ---------- -------
<S> <C> <C> <C>
3/31/94 100.00 100.00 100.00
3/31/95 250.00 111.25 130.93
3/31/96 187.50 151.06 115.41
3/31/97 1,374.99 167.85 147.22
3/31/98 2,999.96 264.00 205.27
3/31/99 1,102.04 342.51 168.66
</TABLE>
49
<PAGE> 50
COMPARISON OF CUMULATIVE TOTAL RETURNS*
[GRAPH]
$3,500.00
$3,000.00
$2,500.00
$2,000.00
$1,500.00
$1,000.00
$500.00
$0.00
1994 1995 1996 1997 1998 1999
YEARS
*TOTAL RETURN BASED ON $100 INITIAL INVESTMENT & REINVESTMENT OF DIVIDENDS
- --------------------------------------------------------------------------------
- -*-RVM INDUSTRIES -O- Nasdaq US --PEER GROUP
- --------------------------------------------------------------------------------
50
<PAGE> 51
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The only owner of record or holder, to the knowledge of RVM as of
June 7, 1999, of more than 5% of RVM's Common Stock is set forth in the
following table:
<TABLE>
<CAPTION>
Title of Name and Address of Amount and Nature of Percent of
Class Beneficial Owner Beneficial Ownership Class
---------------------- ---------------------------------- -------------------------- ------------
<S> <C> <C> <C>
Common Stock Jacob Pollock 1,628,708 (1)(2) 84.08%
753 W. Waterloo Road
Akron, Ohio 44314
Richard D. Pollock 120,270 (3)(2) 6.21
753 W. Waterloo Road
Akron, Ohio 44314
</TABLE>
The following shows the ownership of RVM's Common Stock
beneficially owned directly or indirectly by each director, and by all
directors and officers of RVM as a group, as of June 7, 1999:
<TABLE>
<CAPTION>
Title of Name and Address of Beneficial Amount and Nature of Percent of
Class Owner Beneficial Ownership Class
---------------------- ---------------------------------- ------------------------------- ----------------
<S> <C> <C> <C>
Common Stock Jacob Pollock 1,628,708 (1)(2) 84.08%
Nicholas T. George 57,940 (3)(4) 2.98
C. Stephen Clegg 250 0.01
Richard D. Pollock 120,270 (3)(2) 6.21
All directors and officers as a
group (6 persons) 1,710,993 88.31
</TABLE>
(1) Jacob Pollock has sole voting and investment power with
respect to 1,589,743 shares.
(2) 38,735 shares are held by the Pollock Family Foundation. Jacob
Pollock, Gertrude Pollock, Rick Pollock and Bruce Pollock, as
trustees, equally share voting and investment power with
respect to the shares.
(3) 57,690 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. 19,230 shares listed for
Richard Pollock are owned by his spouse; Mr. Pollock disclaims
beneficial ownership of these shares. The remaining 4,615
shares are owned directly by Mr. Pollock.
(4) Nicholas George has sole voting and investment power with
respect to 250 shares.
No preferred stock is currently outstanding.
51
<PAGE> 52
ITEM 13. 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 $10,171 in
1999. J. Pollock & Company provided management services to the Company
under agreements which terminated on December 31, 1997. The Company paid
$-0- in 1999 for these services. $-0- was owed at March 31, 1999.
The Company leases office and manufacturing space from a corporation
in which Richard Pollock and Bruce Pollock are shareholders. The lease
is for five years expiring December 31, 1999 at a monthly base rent of
$9,300 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
$139,000 in 1999. Richard Pollock and Bruce Pollock are sons of Jacob
Pollock.
Since September 1, 1997, the Company has leased office space from
Pollock Real Estate, Ltd., of which Jacob Pollock and his wife are
members. The lease is for three years expiring August 31, 2000 at a
monthly base rent of $5,500 plus the Company's share of utilities, real
estate taxes, insurance and property maintenance. The Company paid
$85,805 in 1999.
The Company purchased aluminum materials from The Aluminum
Warehouse, Inc., of which Richard Pollock and his family are
shareholders, totaling $91,560 in 1999. $12,549 was owed at March 31,
1999. The Company sold aluminum extrusions to The Aluminum Warehouse,
Inc. totaling $853,747 in 1999. $157,121 was owed at March 31, 1999.
The Company hired temporary personnel from Flex-Team Incorporated,
wholly owned by the Jacob Pollock Irrevocable Trust, of which Richard
Pollock and other family members are beneficiaries, totaling $516,485 in
1999. $93,514 was owed at March 31, 1999.
See Notes 2 and 12 to the consolidated financial statements
regarding acquisitions from and notes payable to related parties. See
Notes 5 and 6 to the consolidated financial statements regarding
guarantees of certain debt of the Company by related parties.
Management believes that the terms of the above transactions are
comparable to those which would have been obtainable from unaffiliated
sources.
52
<PAGE> 53
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------------------------------------
<TABLE>
<CAPTION>
(a) List of documents filed as part of this report: PAGES
<S> <C>
(1) Financial Statements:
Report of Independent Auditors 18
Report of Independent Accountants 19
Consolidated Balance Sheets, March 31, 1999 and 1998 20-21
Consolidated Statements of Operations for the years ended
March 31, 1999, 1998 and 1997 22
Consolidated Statements of Changes in Shareholders' Equity
for the years ended March 31, 1999, 1998 and 1997 23
Consolidated Statements of Cash Flows for the years ended
March 31, 1999, 1998 and 1997 24
Notes to Consolidated Financial Statements 25-42
(2) Financial Statement Schedule:
II-- Valuation and Qualifying Accounts and Reserves
for the years ended March 31, 1999, 1998 and 1997 43
</TABLE>
All other schedules are omitted because they are not
applicable or the required information is presented in the
financial statements or the notes thereto.
(3) Exhibits required by Item 601 of Regulation S-K:
Exhibit No. Item
----------- ----
2 (i) Agreement and Plan of Reorganization among Ravens
Metal Products, Inc., RVM Industries, Inc. and
Ravens, Inc. was filed as Exhibit 2 to Form 8-B filed
March 31, 1997, and is incorporated herein by
reference.
2 (ii) Stock Purchase Agreement for common stock of Albex
Aluminum, Inc. and Signs and Blanks, Inc. was filed
as Exhibit 2.1 to Form 8-K filed on March 31, 1997,
and is incorporated herein by reference.
53
<PAGE> 54
Exhibit No. Item
----------- ----
3 (i) Certificate of Incorporation of RVM was filed as
Exhibit 3.1 to Form 8-B filed March 31, 1997, and is
incorporated herein by reference.
3 (ii) RVM's By-laws were filed as Exhibit 3.2 to Form 8-B
filed March 31, 1997, and are incorporated herein by
reference.
10 (i) Management Agreement dated April 1, 1994, between J.
Pollock & Company and Registrant was filed as Exhibit
10(vii) to Registrant's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1994, and is
incorporated herein by reference.
10 (ii) Loan Agreement dated as of December 1, 1994, between
the Registrant and City of Kent, Ohio was filed as
Exhibit 10(a) on Form 8-K dated December 12, 1994,
and is incorporated herein by reference.
10 (iii) Promissory Note dated December 13, 1994, from the
Registrant to the City of Kent, Ohio was filed as
Exhibit 10(b) on Form 8-K dated December 12, 1994,
and is incorporated herein by reference.
10(iv) Reimbursement Agreement dated June 26, 1995, between
the Registrant and FirstMerit Bank, N.A. (fka First
National Bank of Ohio) was filed as Exhibit 10(v) to
Registrant's Annual Report on Form 10-K for the
fiscal year ended March 31, 1995, and is incorporated
herein by reference.
10 (v) Guaranty Agreement dated as of July 1, 1995, and
executed by the Registrant on August 14, 1995, among
Albex Aluminum, Inc., J. Pollock & Company, Ravens
Metal Products, Inc., Signs And Blanks, Inc., Jacob
Pollock, Gertrude Pollock, Richard D. Pollock, The
Provident Bank, as trustee, and The Director of
Development of the State of Ohio was filed as Exhibit
99(b) on Form 8-K dated August 21, 1995, and is
incorporated herein by reference.
10 (vi) Loan Agreement and Promissory Note dated September
30, 1997, between the Registrant and FirstMerit Bank,
N.A. was filed as Exhibit 10(i) on Form 10-Q for the
quarter ended September 30, 1997, and is incorporated
herein by reference.
10 (vii) Business Loan Agreement and Promissory Note dated
September 30, 1997, between the Registrant and
FirstMerit Bank, N.A. was filed as Exhibit 10(ii) on
Form 10-Q for the quarter ended September 30, 1997,
and is incorporated herein by reference.
10 (viii) Commercial Guaranty dated September 30, 1997, between
Jacob Pollock and FirstMerit Bank, N.A. was filed as
Exhibit 10(iii) on Form 10-Q for the quarter ended
September 30, 1997, and is incorporated herein by
reference.
54
<PAGE> 55
Exhibit No. Item
----------- ----
10(ix) Promissory Note (as amended and restated October 1,
1998) between Albex Aluminum, Inc. & Jacob Pollock
was filed as Exhibit 10(i) on Form 10-Q for the
quarter ended December 31, 1998, and is incorporated
herein by reference.
10(x) Promissory Note (as amended and restated March 31,
1997) between Signs and Blanks, Inc. & J. Pollock &
Company was filed as Exhibit 10(ii) on form 10-Q for
the quarter ended December 31, 1998, and is
incorporated herein by reference.
10(xi) Loan Agreement and Promissory Note dated September
30, 1998, between the Registrant and FirstMerit Bank,
N.A.
21 Subsidiaries of the Registrant
23 (i) Consent of Independent Auditors
23 (ii) Consent of Independent Accountants
27 Financial Data Schedule for the year ended March 31,
1999
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
The Registrant's executive compensation plans and arrangements
required to be filed as exhibits are listed under Exhibit 10 above.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended March 31,
1999.
55
<PAGE> 56
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date June 29, 1999 RVM INDUSTRIES, INC.
By: /S/ Jacob Pollock
----------------------------
Jacob Pollock, Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
Date June 29, 1999 /s/ Jacob Pollock
- --------------------------- ------------------------------
Jacob Pollock, Director and
Chief Executive Officer
Date June 29, 1999 /s/ Nicholas T. George
- --------------------------- ------------------------------
Nicholas T. George, Director
Date June 29, 1999 /s/ C. Stephen Clegg
- --------------------------- ------------------------------
C. Stephen Clegg, Director
Date June 29, 1999 /s/ Richard D. Pollock
- --------------------------- ------------------------------
Richard D. Pollock, Director
Date June 29, 1999 /s/ Louis N. Strike
- --------------------------- ------------------------------
Louis N. Strike, Director
56
<PAGE> 1
Exhibit (xi)
PROMISSORY NOTE
<TABLE>
<CAPTION>
- ------------------- ---------------------- -------------- ---------------- --------------- ----------- ------------ -------
Principal Loan Date Maturity Loan No. Call Collateral Account Officer Initials
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$20,000,000.00 09-30-1998 08-31-2000 UCC KBN
- ------------------- ---------------------- -------------- ---------------- --------------- ----------- ------------ -------
References in the shaded area are for Lender's use only and do not limit the applicability of this document
to any particular loan or item.
- ---------------------------------------------------------------------------------------------------------------------------
Borrower: RVM Industries, Inc.; Ravens, Inc.; Signs and Lender: FirstMerit Bank, N.A.
Blanks, Inc.; Albex Aluminum, Inc. Asset Based Lending
753 W. Waterloo Rd. 106 S. Main St.
Akron, OH 44314 Akron, OH 44308
- ---------------------------------------------------------------------------------------------------------------------------
Principal Amount: $20,000,000.00 Initial Rate: 8.250% Date of Note: September 30, 1998
</TABLE>
PROMISE TO PAY. RVM Industries, Inc.; Ravens, Inc.; Signs and Blanks Inc.; Albex
Aluminum, Inc. ("Borrower") promises to pay to FirstMerit Bank, N.A.
("Lender"), or order, in lawful money of the United States of America, the
principal amount of Twenty Million & 00/100 Dollars ($20,000,000.00) or so much
as may be outstanding, together with interest on the unpaid outstanding
principal balance of each advance. Interest shall be calculated from the date of
each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid interest on August 31, 2000. In addition, Borrower will
pay regular monthly payments of accrued unpaid interest beginning October 31,
1998, and all subsequent interest payments are due on the same day of each month
after that. The annual interest rate for this Note is computed on a 365/360
basis; that is, by applying the ratio of the annual interest rate over a year of
360 days, multiplied by the outstanding principal balance, multiplied by the
actual number of days the principal balance is outstanding. Borrower will pay
Lender at Lender's address shown above or at such other place as Lender may
designate in writing. Unless otherwise agreed or required by applicable law,
payments will be applied first to accrued unpaid interest, then to principal,
and any remaining amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an Index which is Lender's Prime Rate (the
"Index"). This is the rate Lender charges, or would charge, on 90-day unsecured
loans to the most creditworthy corporate customers. This rate may or may not be
the lowest rate available from Lender at any given time. Lender will tell
Borrower the current Index rate upon Borrower's request. Borrower understands
that Lender may make loans based on other rates as well. The Interest rate
change will not occur more often than each day as Prime changes. The Index
currently is 8.50% per annum. The interest rate to be applied to the unpaid
principal balance of this Note will be at a rate of 0.250 percentage points
under the Index, resulting in an initial rate of 8.250% per annum. NOTICE:
Under no circumstances will the interest rate on this Note be more than the
maximum rate allowed by applicable law.
PREPAYMENT: MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of
this Note, Borrower understands that Lender is entitled to a minimum interest
charge of $35.00. Other than Borrower's obligation to pay any minimum Interest
charge, Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
of accrued unpaid interest. Rather, they will reduce the principal balance due.
LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged
5.00% of the unpaid portion of the regularly scheduled payment or $35.00,
whichever is greater.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor of this Note. (h) A material
adverse change occurs in Borrower's financial condition, or Lender believes the
prospect of payment or performance of the indebtedness is impaired.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note within
the preceding twelve (12) months, it may be cured (and no event of default will
have occurred) if Borrower, after receiving written notice from Lender demanding
cure of such default: (a) cured the default within fifteen (15) days; or (b) if
the cure requires more than fifteen (15) days, immediately initiates steps which
Lender deems in Lender's sole discretion to be sufficient to cure the default
and thereafter continues and completes all reasonable and necessary steps
sufficient to produce compliance as soon as reasonably practical.
LENDER'S RIGHTS, Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Lender may hire or pay someone
else to help collect this Note if Borrower does not pay. Borrower also will pay
Lender that amount. This includes, subject to any limits under applicable law.
Lender's attorneys' fees and Lender's legal expenses whether or not there is a
lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. If not
prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. This Note has been delivered to
Lender and accepted by Lender in the State of Ohio. If there is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction of the
courts of Summit County, the State of Ohio. Lender and Borrower hereby waive the
right to any jury trial in any action, proceeding, or counterclaim brought by
either Lender or Borrower against the other. This Note shall be governed by
and construed in accordance with the laws of the State of Ohio.
CONFESSION OF JUDGMENT. Borrower hereby irrevocably authorizes and empowers any
attorney-at-law, including an attorney hired by Lender, to appear in any court
of record and to confess judgment against Borrower for the unpaid amount of this
Note as evidenced by an affidavit signed by an officer of Lender setting forth
the amount then due, plus attorneys' fees as provided in this Note, plus costs
of suit, and to release all errors and waive all rights of appeal. If a copy of
this Note, verified by an affidavit, shall have been filed in the proceeding, it
will not be necessary to file the original as a warrant of attorney. Borrower
waives the right to any stay of execution and the benefit of all exemption laws
now or hereafter in effect. No single exercise of the foregoing warrant and
power to confess judgment will be deemed to exhaust the power, whether or not
any such exercise shall be held by any court to be invalid, voidable, or void;
but the power will continue undiminished and may be exercised from time to time
as Lender may elect until all amounts owing on this Note have been paid in full.
Borrower waives any conflict of interest that an attorney hired by Lender may
have in acting on behalf of Borrower in confessing judgment against Borrower
while such attorney is retained by Lender. Borrower expressly consents to such
attorney acting for Borrower in confessing judgment.
DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $24.00 if Borrower
makes a payment on Borrower's loan and the check or preauthorized charge with
which Borrower pays is later dishonored.
<PAGE> 2
PROMISSORY NOTE
(Continued)
Loan No
- --------------------------------------------------------------------------------
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note may be requested orally by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing. All
communications, instructions, or directions by telephone or otherwise to Lender
are to be directed to Lender's office shown above. The following party or
parties are authorized to request advances under the line of credit until Lender
receives from Borrower at Lender's address shown above written notice of
revocation of their authority: Jacob Pollock; Richard D. Pollock; John J. Stitz;
The following party or parties are authorized to request advances on the Line of
Credit on behalf of the Company specifically listed next to their names until
Lender receives from Borower, at Lender's address shown above, written notice of
revocation of their authority; Linda DePrato, (All); Kathy Bean, (All); Steve
McDevitt, (All); Carol Cutler, (Signs and Blanks, Inc.); Diane Clark, (Albex
Aluminum, Inc.); and Jayshree Shah, (Ravens, Inc.). Borrower agrees to be liable
for all sums either: (a) advanced in accordance with the instructions of an
authorized person or (b) credited to any of Borrower's accounts with Lender. The
unpaid principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender's internal records, including daily
computer print-outs. Lender will have no obligation to advance funds under this
Note if: (a) Borrower or any guarantor is in default under the terms of this
Note or any agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (b) Borrower or
any guarantor ceases doing business or is insolvent; (c) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender; (d) Borrower has applied
funds provided pursuant to this Note for purposes other than those authorized by
Lender.
FEE PROVISION. Upon receipt of billing from Lender, I agree to pay a loan fee of
$n/a and a document preparation fee of $n/a.
GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. In particular, this section means (among other
things) that Borrower does not agree or intend to pay, and Lender does not agree
or intend to contract for, charge, collect, take, reserve or receive
(collectively referred to herein as "charge or collect"), any amount in the
nature of interest or in the nature of a fee for this loan, which would in any
way or event (including demand, prepayment, or acceleration) cause Lender to
charge or collect more for this loan than the maximum Lender would be permitted
to charge or collect by federal law or the law of the State of Ohio (as
applicable). Any such excess interest or unauthorized fee shall, instead of
anything stated to the contrary, be applied first to reduce the principal
balance of this loan, and when the principal has been paid in full, be refunded
to Borrower. Lender may delay or forgo enforcing any of its rights or remedies
under this Note without losing them. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing,
no party who signs this Note, whether as maker, guarantor, accommodation maker
or endorser, shall be released from liability. All such parties agree that
Lender may renew or extend (repeatedly and for any length of time) this loan,
or release any party or guarantor or collateral; or impair, fail to realize
upon or perfect Lender's security interest in the collateral; and take any
other action deemed necessary by Lender without the consent of or notice to
anyone. All such parties also agree that Lender may modify this loan without the
consent of or notice to anyone other than the party with whom the modification
is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
- --------------------------------------------------------------------------------
NOTICE: FOR THIS NOTICE "YOU" MEANS THE BORROWER AND "HIS" MEANS LENDER.
WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT
TRIAL. IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU
WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT
FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR
RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT
OR ANY OTHER CAUSE.
- --------------------------------------------------------------------------------
BORROWER:
RVM Industries, Inc.; Signs and Blanks, Inc.; Albex Aluminum, Inc.
By: /s/ John J. Stitz
------------------------------------------------
John J. Stitz, Vice President, CFO of RVM Industries, Inc.
By: /s/ John J. Stitz
------------------------------------------------
John J. Stitz, Vice President, CFO of Ravens, Inc.
By: /s/ John J. Stitz
------------------------------------------------
John J. Stitz, Vice President of Signs and Blanks, Inc.
By: /s/ John J. Stitz
------------------------------------------------
John J. Stitz, Vice President of Albex Aluminum, Inc.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Name of Subsidiary State of Incorporation
- --------------------------------------------------------------------------------
Albex Aluminum, Inc. (fka Wirt Metal Products, Inc.) Ohio
Ravens, Inc. (fka Ravens Metal Products, Inc.) Delaware
Also does business as Ravens Trailer Sales
Signs and Blanks, Inc. Ohio
57
<PAGE> 1
EXHIBIT 23 (i)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement on
Form S-8 filed June 6, 1994, pertaining to the RVM Industries, Inc., Stock
Option Plan (formerly the Ravens Metal Products, Inc., Stock Option Plan) of our
report dated June 21, 1999, with respect to the consolidated financial
statements and schedule of RVM Industries, Inc. included in the Annual Report
(Form 10-K) for the year ended March 31, 1999.
/S/ ERNST & YOUNG LLP
Akron, Ohio
June 21, 1999
58
<PAGE> 1
EXHIBIT 23 (ii)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
RVM Industries, Inc. and Subsidiaries, as reporting company successor to Ravens
Metal Products, Inc., on Form S-8 of our report dated June 6, 1997 on our audit
of the consolidated financial statement of operations of RVM Industries, Inc.
for the year ended March 31, 1997, which report is included in this Annual
Report on Form 10-K.
/S/ PRICEWATERHOUSECOOPERS LLP
Cleveland, Ohio
June 25, 1999
59
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 328,490
<SECURITIES> 0
<RECEIVABLES> 10,285,714
<ALLOWANCES> 107,000
<INVENTORY> 10,697,909
<CURRENT-ASSETS> 22,366,044
<PP&E> 34,648,081
<DEPRECIATION> 8,856,454
<TOTAL-ASSETS> 48,999,890
<CURRENT-LIABILITIES> 11,710,949
<BONDS> 26,246,431
0
0
<COMMON> 19,371
<OTHER-SE> 9,403,139
<TOTAL-LIABILITY-AND-EQUITY> 48,999,890
<SALES> 83,035,031
<TOTAL-REVENUES> 83,307,708
<CGS> 71,476,238
<TOTAL-COSTS> 71,476,238
<OTHER-EXPENSES> 7,342,905
<LOSS-PROVISION> 38,717
<INTEREST-EXPENSE> 1,922,974
<INCOME-PRETAX> 2,565,591
<INCOME-TAX> 1,032,250
<INCOME-CONTINUING> 1,533,341
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,533,341
<EPS-BASIC> .79
<EPS-DILUTED> .79
</TABLE>
