SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1998
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Commission File Number 1-1031
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RONSON CORPORATION
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(Exact name of registrant as specified in its charter)
New Jersey 22-0743290
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Corporate Park III-Campus Drive, P.O. Box 6707, Somerset, NJ 08875
------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(732) 469-8300
----------------------------------------------------
(Registrant's telephone number, including area code)
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 [ ]
As of March 31, 1998, there were 3,177,175 shares of the registrant's common
stock outstanding.
<PAGE>
RONSON CORPORATION
FORM 10-Q INDEX
PART I - FINANCIAL INFORMATION:
CONSOLIDATED BALANCE SHEETS:
MARCH 31, 1998 AND DECEMBER 31, 1997
CONSOLIDATED STATEMENTS OF EARNINGS:
QUARTER ENDED MARCH 31, 1998 AND 1997
CONSOLIDATED STATEMENTS OF CASH FLOWS:
QUARTER ENDED MARCH 31, 1998 AND 1997
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
PART II - OTHER INFORMATION:
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
<PAGE>
<TABLE>
<CAPTION>
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
----------------------------------------------------
(in thousands of dollars)
March 31, December 31,
1998 1997
-------- --------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 72 $ 32
Accounts receivable - net 1,548 1,865
Inventories:
Finished goods 2,229 2,260
Work in process 133 62
Raw materials 659 695
-------- --------
3,021 3,017
Other current assets 932 914
-------- --------
TOTAL CURRENT ASSETS 5,573 5,828
-------- --------
Property, plant and equipment, at cost:
Land 19 19
Buildings and improvements 3,743 3,742
Machinery and equipment 7,103 7,071
Construction in progress 71 61
-------- --------
10,936 10,893
Less accumulated depreciation and amortization 5,563 5,424
-------- --------
5,373 5,469
Other assets 2,233 2,222
-------- --------
$ 13,179 $ 13,519
======== ========
<PAGE>
<CAPTION>
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
----------------------------------------------------
(in thousands of dollars)
March 31, December 31,
1998 1997
-------- --------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ 2,161 $ 2,713
Current portion of long-term debt and leases 445 459
Accounts payable 1,594 1,431
Accrued expenses 1,738 1,724
Current liabilities of discontinued operations 1,078 1,106
-------- --------
TOTAL CURRENT LIABILITIES 7,016 7,433
-------- --------
Long-term debt and leases 3,644 3,744
Other long-term liabilities 410 478
STOCKHOLDERS' EQUITY:
Common stock 3,240 3,226
Additional paid-in capital 28,994 28,991
Accumulated deficit (26,970) (27,153)
Accumulated other comprehensive deficit (1,561) (1,606)
-------- --------
3,703 3,458
Less cost of treasury shares 1,594 1,594
-------- --------
TOTAL STOCKHOLDERS' EQUITY 2,109 1,864
-------- --------
$ 13,179 $ 13,519
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
------------------------------------------------------------
(in thousands of dollars, except per share data) (unaudited)
Quarter Ended
March 31,
---------------------
1998 1997*
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<S> <C> <C>
NET SALES $5,435 $5,603
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Cost and expenses:
Cost of sales 3,194 3,467
Selling, shipping and advertising 870 913
General and administrative 903 808
Depreciation and amortization 139 141
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5,106 5,329
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EARNINGS FROM OPERATIONS 329 274
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Other expense:
Interest expense 168 123
Other-net 10 12
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178 135
------ ------
EARNINGS BEFORE INCOME TAXES 151 139
Income tax benefits-net 32 39
------ ------
NET EARNINGS $ 183 $ 178
====== ======
NET EARNINGS PER COMMON SHARE:
Basic $ 0.06 $ 0.06
====== ======
Diluted $ 0.06 $ 0.06
====== ======
</TABLE>
See notes to consolidated financial statements.
* Reclassified for comparability.
<PAGE>
<TABLE>
<CAPTION>
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------
(in thousands of dollars) (unaudited)
Quarter Ended
March 31,
------------------
1998 1997*
----- -----
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $ 183 $ 178
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 139 141
Deferred income tax benefits (38) (50)
Increase (decrease) in cash from changes in
current assets and current liabilities 493 492
Other (45) (238)
----- -----
Net cash provided by operating activities 732 523
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Cash Flows from Investing Activities:
Net cash used in investing activities,
capital expenditures (31) (99)
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Cash Flows from Financing Activities:
Proceeds from short-term debt 40 --
Proceeds from exercise of stock options 17 --
Payments of short-term debt (592) (416)
Payments of long-term debt (103) (86)
Payments of long-term lease obligations (23) (27)
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Net cash used in financing activities (661) (529)
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Net increase (decrease) in cash 40 (105)
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Cash at beginning of period 32 116
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Cash at end of period $ 72 $ 11
===== =====
</TABLE>
See notes to consolidated financial statements.
* Reclassified for comparability.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 1998 (unaudited)
Note 1: ACCOUNTING POLICIES
Basis of Financial Statement Presentation - The information as of and
for the three months ended March 31, 1998 and 1997, is unaudited. In the opinion
of management, all adjustments necessary for a fair presentation of the results
of such interim periods have been included.
Per Common Share Data - Basic net earnings per common share was
computed by dividing net earnings less cumulative preferred dividends by the
weighted average number of common shares outstanding.
Diluted net earnings per common share was computed by dividing net
earnings by the weighted average number of common shares outstanding, plus the
assumed conversion of the preferred shares to common shares and the dilutive
effect of outstanding stock options.
The weighted average number of common shares used for these
computations was as follows:
Quarter Ended
March 31,
--------------------
1998 1997
--------- ---------
Basic 3,166,518 2,728,612
Diluted (1) 3,219,592 3,031,256
(1) The number of shares for the computation of diluted earnings per share for
the quarter ended March 31, 1997, has been adjusted to include the dilutive
effect of outstanding stock options in accordance with Statement of
Financial Accounting Standards ("SFAS") #128, "Earnings per Share".
On November 15, 1996, the Company issued an offer to exchange 1.7
shares of its common stock for each share of preferred stock outstanding. During
the quarter ended March 31, 1997, the Company accepted approximately 623,000
preferred shares tendered in accordance with the terms of its offer.
Approximately 1,059,000 common shares were issued in exchange for the preferred
shares tendered and accepted. After the expiration of the offer on September 30,
1997, the Company had accepted a total of 800,844 shares of preferred stock and
had issued a total of 1,361,435 shares of common stock in exchange under the
Company's Exchange Offer. At March 31, 1998, the Company had outstanding 36,518
shares of preferred stock and 3,177,175 shares of common stock.
Discontinued Operations - In December 1989 the Company adopted a plan
to discontinue the operations in 1990 of one of its New Jersey facilities,
Ronson Metals Corporation, subsequently renamed Prometcor, Inc. ("Prometcor").
As a result, the operations of Prometcor have been classified as discontinued
operations in the accompanying Consolidated Statements of Earnings and other
related operating statement data.
This quarterly report should be read in conjunction with the Company's
Annual Report on Form 10-K.
<PAGE>
Note 2: SHORT-TERM DEBT
In 1995 Ronson Consumer Products Corporation ("RCPC") entered into an
agreement with Summit Bank ("Summit") for a Revolving Loan and a Term Loan. The
Revolving Loan of $1,492,000 at March 31, 1998, provides a line of credit up to
$2,500,000 to RCPC based on accounts receivable and inventory. The balance of
the Term Loan was $6,250 at March 31, 1998, and was paid in full on April 1,
1998.
In July 1997 RCPC and Summit amended the Revolving Loan agreement to
provide $400,000 in additional loan availability. The $400,000 additional loan
availability is being reduced in monthly amounts of $14,583 from October 1997 to
March 1998 and $20,833 from April 1998 to June 1999. The outstanding amount
under the agreement for the additional available loan of $313,000 as of March
31, 1998, is included in the balance of the Revolving Loan in the paragraph
above.
In 1995 Ronson-Canada entered into an agreement with Canadian Imperial
Bank of Commerce ("CIBC") for a line of credit of C$250,000. The Revolving Loan
balance of $163,000 (C$232,000) at March 31, 1998, by Ronson-Canada under the
line of credit is secured by the accounts receivable and inventory of
Ronson-Canada.
At March 31, 1998, Ronson Aviation, Inc. ("Ronson Aviation") had notes
payable consisting of the following: 1) $346,000 due to Raytheon Aircraft Credit
Corp.; and 2) $160,000 due to Greentree Financial Servicing Corporation. These
notes are each collateralized by specific aircraft, and the notes are to be
repaid from the proceeds from the sale of the aircraft.
In August 1997 Ronson Aviation entered into an agreement with Summit
for a Revolving Loan and a Term Loan (refer to Note 3 below regarding the Term
Loan). The Revolving Loan, which had not yet been utilized at March 31, 1998,
provides a line of credit up to $400,000 to Ronson Aviation based on the level
of its accounts receivable.
Note 3: LONG-TERM DEBT
In August 1997 Ronson Aviation entered into a Term Loan agreement with
Summit in the original amount of $285,000. The Term Loan balance was $257,000 at
March 31, 1998.
<PAGE>
Note 4: CONTINGENCIES
On August 31, 1995, the Company received a General Notice Letter from
the United States Environmental Protection Agency ("USEPA") notifying the
Company that the USEPA considered the Company one of about four thousand
Potentially Responsible Parties ("PRP's") for waste disposed of prior to 1980 at
a landfill in Monterey Park, California, which the USEPA designated as a
Superfund site ("Site"). The USEPA identified manifests dated from 1974 through
1979 which allegedly indicate that waste originating at the location of the
Company's former Duarte, California, hydraulic subsidiary was delivered to the
Site. The Company sold the Duarte, California, hydraulic subsidiary to the
Boeing Corporation in 1981. As a result of successfully challenging the USEPA's
original volumetric allocation, on September 29, 1995, the USEPA reduced the
volume of waste attributed to the Duarte facility, Ronson Hydraulic Units
Corporation ("RHUCOR-CA"), and determined the volume to be "de minimis". In
addition, counsel for this matter has informed the Company that factual
arguments are available that could further reduce the amount of waste attributed
to the hydraulic subsidiary, and that arguments also exist that the subsequent
owners of the facility should be required to pay a significant portion, or
possibly all, of the costs the USEPA determines to be due as a result of
RHUCOR-CA's waste having been sent to the Site. Although the Company's final
contribution amount, if any, is not yet determinable, in the General Notice
Letter, the USEPA offered to partially settle the matter if the Company paid
$212,000, which would have been full settlement of the Fifth Partial Consent
Decree. This offer, however, was made prior to the USEPA reduction of the volume
of waste allocated to RHUCOR-CA and prior to the USEPA determination that the
waste volume is "de minimis". Because the USEPA has determined that the volume
of waste generated by the facility and sent to the Site is "de minimis", and
because the USEPA has sent a General Notice Letter to another PRP for the same
waste, the Company believes that the cost, if any, will not have a material
effect on the Company's financial position.
The Company is involved in various lawsuits and claims. While the
amounts claimed may be substantial, the ultimate liability cannot now be
determined because of the considerable uncertainties that exist. Therefore, it
is possible that results of operations or liquidity in a particular period could
be materially affected by certain contingencies. However, based on facts
currently available, including the insurance coverage that the Company has in
place, management believes that the outcome of these lawsuits and claims will
not have a material adverse effect on the Company's financial position.
Note 5: COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted SFAS #130, "Reporting
Comprehensive Income". Comprehensive Income is the change in equity during a
period from transactions and other events from nonowner sources. Under SFAS
#130, the Company is required to classify items of other comprehensive income in
financial statements and to display the accumulated balance of other
comprehensive income (deficit) separately in the equity section of the
Consolidated Balance Sheets. The adoption of SFAS #130 does not have a material
impact on the financial position or results of operations of the Company.
<PAGE>
The composition of Comprehensive Income was as follows (in thousands):
Quarter Ended
March 31,
------------------
1998 1997
----- -----
Net earnings $ 183 $ 178
Other comprehensive income, net of tax:
Minimum pension liability adjustment 40 35
Foreign currency translation adjustment 5 (10)
----- -----
Comprehensive income $ 228 $ 203
===== =====
Note 6: STATEMENTS OF CASH FLOWS
Certificates of deposit that have a maturity of three months or more
are not considered cash equivalents for purposes of the accompanying
Consolidated Statements of Cash Flows.
Supplemental disclosure of cash flow information (in thousands):
Quarter Ended
March 31,
-------------
1998 1997
---- ----
Cash Payments for Interest $169 $126
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
First Quarter 1998 Compared to First Quarter 1997
The Registrant, Ronson Corporation ("the Company"), had Net Earnings in
the first quarter of 1998 of $183,000 compared to Net Earnings in the first
quarter of 1997 of $178,000. The Company's Earnings before Income Taxes
increased to $151,000 in the first quarter of 1998 from $139,000 in the first
quarter of 1997.
The Company's Consolidated Net Sales were $5,435,000 in the first
quarter of 1998 compared to $5,603,000 in the first quarter of 1997. Net sales
of consumer products at Ronson Consumer Products Corporation, Woodbridge, New
Jersey, and Ronson Corporation of Canada, Ltd., Mississauga, Ontario (together
"Ronson Consumer Products"), decreased by 5% in the first quarter of 1998 as
compared to the first quarter of 1997 primarily due to decreased shipments of
lighters and accessory products. Net sales at Ronson Aviation, Inc. ("Ronson
Aviation"), Trenton, New Jersey, increased by 2% in the first quarter of 1998 as
compared to the first quarter of 1997, primarily because lower aircraft sales
were more than offset by increased sales of charter services in the first
quarter of 1998. This increase in revenue from charter operations is primarily
due to Ronson Aviation's fourth quarter 1997 purchase of a Cessna Citation II
jet and to increases in other charter revenues.
Consolidated Cost of Sales, as a percentage of Consolidated Net Sales,
was reduced to 59% in the first quarter of 1998 from 62% in the first quarter of
1997. The Cost of Sales percentage at Ronson Consumer Products decreased to 50%
in the first quarter of 1998 as compared to 53% in the first quarter of 1997
primarily due to increases in the selling prices of products sold. The Cost of
Sales percentage at Ronson Aviation decreased to 77% in the first quarter of
1998 as compared to 84% in the first quarter of 1997 primarily due to increased
sales of general aviation services, particularly increased charter services.
Consolidated General and Administrative Expenses, as a percentage of
Consolidated Net Sales, increased to 17% in the first quarter of 1998 as
compared to 14% in the first quarter of 1997. The increase was primarily due to
business development costs and to increased professional fees in the first
quarter of 1998.
The Company's Earnings from Operations improved by 20% to $329,000 in
the first quarter of 1998 compared to $274,000 in the first quarter of 1997.
This improvement in operating earnings of $55,000 was due to an improvement at
Ronson Aviation of over $100,000. Ronson Consumer Products' operating earnings,
while still much higher than Ronson Aviation's, declined by 3%, partially
offsetting the increase at Ronson Aviation. The improvement in sales and
operating earnings at Ronson Aviation was primarily due to increased sales of
charter services, and the majority of this increase in charter revenue is from
Ronson Aviation's expansion into jet charter operations with its purchase of the
Cessna Citation II.
Interest Expense increased to $168,000 from $123,000 in the first
quarter of 1997 primarily due to increased long-term debt at Ronson Aviation to
finance its fourth quarter 1997 purchase of the Citation II.
<PAGE>
FINANCIAL CONDITION
The Company's Stockholders' Equity improved to $2,109,000 at March 31,
1998, from $1,864,000 at December 31, 1997. The improvement of $245,000 in 1998
Stockholders' Equity was primarily due to the Net Earnings of $183,000 in the
first quarter of 1998. At March 31, 1998, the Company's first quarter 1998 Net
Earnings were the primary factor improving the Company's working capital by
$162,000 in the quarter to a deficiency in working capital of $1,443,000 at
March 31, 1998, as compared to $1,605,000 at December 31, 1997.
The Company has continued to meet its obligations as they have matured
and management believes that the Company will continue to meet its obligations
through internally generated funds from future net earnings and depreciation,
established external financing arrangements, potential additional sources of
financing and existing cash balances.
PART II - OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(11) Statement re computation of per share earnings is
attached hereto as Exhibit 11.
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RONSON CORPORATION
Date: May 13, 1998 /s/Louis V. Aronson II
-------------------------------
Louis V. Aronson II, President
and Chief Executive Officer
(Signing as Duly Authorized
Officer of the Registrant)
Date: May 13, 1998 /s/Daryl K. Holcomb
-------------------------------
Daryl K. Holcomb, Vice President
and Chief Financial Officer,
Controller and Treasurer
(Signing as Chief Financial
Officer of the Registrant)
<TABLE>
<CAPTION>
RONSON CORPORATION Exhibit 11
CALCULATION OF EARNINGS PER COMMON SHARE
(Dollars in thousands, except per common share data)
Quarter Ended March 31,
1998 1997 *
----------- -----------
<S> <C> <C>
Basic:
Net earnings $ 183 $ 178
Less cumulative preferred dividends (2) (11)
----------- -----------
Net earnings applicable to common
stock $ 181 $ 167
=========== ===========
Weighted average number of common
shares outstanding 3,166,518 2,728,612
----------- -----------
Net earnings per common share $ 0.06 $ 0.06
=========== ===========
Diluted:
Net earnings $ 183 $ 178
=========== ===========
Weighted average number of common
shares outstanding 3,166,518 2,728,612
Additional common shares outstanding
resulting from assumed conversion
of preferred stock to common stock 36,518 292,431
Additional common shares outstanding
resulting from the dilutive effect
of outstanding stock options 16,556 10,213
----------- -----------
Total 3,219,592 3,031,256
=========== ===========
Net earnings per common share $ 0.06 $ 0.06
=========== ===========
</TABLE>
* Reclassified for comparability.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 72
<SECURITIES> 0
<RECEIVABLES> 1,605
<ALLOWANCES> (57)
<INVENTORY> 3,021
<CURRENT-ASSETS> 5,573
<PP&E> 10,936
<DEPRECIATION> 5,563
<TOTAL-ASSETS> 13,179
<CURRENT-LIABILITIES> 7,016
<BONDS> 3,644
0
0
<COMMON> 3,240
<OTHER-SE> (1,131)
<TOTAL-LIABILITY-AND-EQUITY> 13,179
<SALES> 5,435
<TOTAL-REVENUES> 5,435
<CGS> 3,194
<TOTAL-COSTS> 3,194
<OTHER-EXPENSES> 1,910
<LOSS-PROVISION> 12
<INTEREST-EXPENSE> 168
<INCOME-PRETAX> 151
<INCOME-TAX> (32)
<INCOME-CONTINUING> 183
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 183
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
