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Previous: ROLLINS INC, 10-Q, 1999-11-15 |
Next: ROSES HOLDINGS INC, 10-Q, 1999-11-15 |
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 September 30, 1999
Commission File Number 1-1031
RONSON CORPORATION
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
| New Jersey | 22-0743290 |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Corporate Park III-Campus Drive, P.O. Box 6707, Somerset, NJ 08875-6707
------------------------------------------------------------------------------------------------
(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 September 30, 1999, there were 3,197,736 shares of the registrant's common stock outstanding.
RONSON CORPORATION
FORM 10-Q INDEX
PART I - FINANCIAL INFORMATION:
CONSOLIDATED BALANCE SHEETS: SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
CONSOLIDATED STATEMENTS OF OPERATIONS:
CONSOLIDATED STATEMENTS OF CASH FLOWS:
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
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
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
----------------------------------------------------
(in thousands of dollars)
September 30, December 31,
1999 1998
-------- --------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 20 $ 146
Accounts receivable, net 1,524 1,777
Inventories:
Finished goods 2,078 2,189
Work in process 42 66
Raw materials 516 429
-------- --------
2,636 2,684
Other current assets 1,418 1,447
-------- --------
TOTAL CURRENT ASSETS 5,598 6,054
-------- --------
Property, plant and equipment, at cost:
Land 19 19
Buildings and improvements 4,199 3,740
Machinery and equipment 7,671 7,456
Construction in progress 175 471
-------- --------
12,064 11,686
Less accumulated depreciation and amortization 6,285 5,879
-------- --------
5,779 5,807
Other assets 2,811 2,741
-------- --------
$ 14,188 $ 14,602
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ 1,807 $ 2,209
Current portion of long-term debt and leases 549 489
Accounts payable 2,451 1,941
Accrued expenses 1,764 1,790
Current liabilities of discontinued operations 964 1,833
-------- --------
TOTAL CURRENT LIABILITIES 7,535 8,262
-------- --------
Long-term debt and leases 3,966 3,761
Other long-term liabilities 461 434
STOCKHOLDERS' EQUITY:
Common stock 3,260 3,260
Additional paid-in capital 28,957 29,007
Accumulated deficit (27,356) (27,442)
Accumulated other comprehensive deficit (1,041) (1,086)
-------- --------
3,820 3,739
Less cost of treasury shares 1,594 1,594
-------- --------
TOTAL STOCKHOLDERS' EQUITY 2,226 2,145
-------- --------
$ 14,188 $ 14,602
======== ========
See notes to consolidated financial statements
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
------------------------------------------------------------
(in thousands of dollars, except per share data) (unaudited)
Quarter Ended
September 30,
----------------------
1999 1998
------- -------
NET SALES $ 6,222 $ 6,145
------- -------
Cost and expenses:
Cost of sales 4,182 3,769
Selling, shipping and advertising 950 961
General and administrative 895 982
Depreciation and amortization 145 138
------- -------
6,172 5,850
------- -------
EARNINGS FROM OPERATIONS 50 295
------- -------
Other expense:
Interest expense 177 159
Other-net 60 10
------- -------
237 169
------- -------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (187) 126
Income tax benefits-net 16 25
------- -------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS (171) 151
Loss from discontinued operations (net of
deferred income tax benefits of $65 in 1999) (125) -
------- -------
NET EARNINGS (LOSS) $ (296) $ 151
======= =======
EARNINGS (LOSS) PER COMMON SHARE:
Basic:
Earnings (loss) from continuing operations $ (0.05) $ 0.05
Loss from discontinued operations (0.04) -
------- -------
Net earnings (loss) $ (0.09) $ 0.05
======= =======
Diluted:
Earnings (loss) from continuing operations $ (0.05) $ 0.05
Loss from discontinued operations (0.04) -
------- -------
Net earnings (loss) $ (0.09) $ 0.05
======= =======
See notes to consolidated financial statements.
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
------------------------------------------------------------
(in thousands of dollars, except per share data) (unaudited)
Nine Months Ended
September 30,
-----------------------
1999 1998
-------- --------
NET SALES $ 18,972 $ 17,846
-------- --------
Cost and expenses:
Cost of sales 11,766 10,773
Selling, shipping and advertising 2,911 2,721
General and administrative 2,955 2,881
Depreciation and amortization 422 413
-------- --------
18,054 16,788
-------- --------
EARNINGS FROM OPERATIONS 918 1,058
-------- --------
Other expense:
Interest expense 501 494
Other-net 117 48
-------- --------
618 542
-------- --------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 300 516
Income tax expenses (benefits)-net 89 (89)
-------- --------
EARNINGS FROM CONTINUING OPERATIONS 211 605
Loss from discontinued operations (net of
deferred income tax benefits of $65 in 1999) (125) -
-------- --------
NET EARNINGS $ 86 $ 605
======== ========
EARNINGS (LOSS) PER COMMON SHARE:
Basic:
Earnings from continuing operations $ 0.06 $ 0.19
Loss from discontinued operations (0.04) -
-------- --------
Net earnings $ 0.02 $ 0.19
======== ========
Diluted:
Earnings from continuing operations $ 0.06 $ 0.19
Loss from discontinued operations (0.04) -
-------- --------
Net earnings $ 0.02 $ 0.19
======== ========
See notes to consolidated financial statements.
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------------
(in thousands of dollars) (unaudited)
Nine Months Ended
September 30,
----------------------
1999 1998
------- -------
Cash Flows from Operating Activities:
Net earnings $ 86 $ 605
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 422 413
Deferred income tax expenses (benefits) 62 (112)
Increase in cash from changes in current
assets and current liabilities 941 450
Discontinued operations (935) (415)
Other (174) 138
------- -------
Net cash provided by operating
activities 402 1,079
------- -------
Cash Flows from Investing Activities:
Net cash used in investing activities,
capital expenditures (367) (388)
------- -------
Cash Flows from Financing Activities:
Proceeds from short-term debt 387 1,084
Proceeds from long-term debt 629 264
Proceeds from exercise of stock options - 14
Payments of short-term debt (789) (1,449)
Payments of long-term debt (315) (282)
Payments of long-term lease obligations (73) (69)
------- -------
Net cash used in operating
activities (161) (438)
------- -------
Net increase (decrease) in cash (126) 253
Cash at beginning of period 146 32
------- -------
Cash at end of period $ 20 $ 285
======= =======
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1999 (unaudited)
Note 1: ACCOUNTING POLICIES
Basis of Financial Statement Presentation - The information as of and for the three-month and nine-month periods ended September 30, 1999 and 1998, is unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the results of such interim periods have been included.
Discontinued Operations - In December 1989 Ronson Corporation (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 Operations and other related operating statement data.
This quarterly report should be read in conjunction with the Company's Annual Report on Form 10-K.
Note 2: PER COMMON SHARE DATA
The calculation and reconciliation of Basic and Diluted Earnings (Loss) per Common Share were as follows (in thousands except per share data):
Quarter Ended September 30,
------------------------------------------------------------------------------------
1999 1998
--------------------------------------- --------------------------------------
Per Per
Earnings Share Share
(Loss) Shares Amount Earnings Shares Amount
------ ------ ------ -------- ------ ------
Earnings (loss)
from continuing
operations ............... $ (171) $ 151
Less accrued
dividends on
preferred stock .......... (2) (2)
------- -------
Continuing
operations ............... (173) 3,198 $ (0.05) 149 3,192 $ 0.05
Loss from discon-
tinued operations ........ (125) 3,198 (0.04) -- 3,192 --
------- -------- ------- --------
BASIC .................... $ (298) 3,198 $ (0.09) $ 149 3,192 $ 0.05
======= ===== ======== ======= ===== ========
Effect of dilutive
securities (1):
Stock options ............ -- 22
Cumulative con-
vertible prefer-
red stock ............... $ -- -- $ 2 37
------- ----- ------- -----
Continuing
operations ............... (173) 3,198 $ (0.05) 151 3,251 $ 0.05
Loss from discon-
tinued
operations ............... (125) 3,198 (0.04) -- 3,251 --
------- -------- ------- --------
DILUTED .................. $ (298) 3,198 $ (0.09) $ 151 3,251 $ 0.05
======= ===== ======== ======= ===== ========
Nine Months Ended September 30,
------------------------------------------------------------------------------------
1999 1998
--------------------------------------- --------------------------------------
Per Per
Earnings Share Share
(Loss) Shares Amount Earnings Shares Amount
------ ------ ------ -------- ------ ------
Earnings (loss)
from continuing
operations...... $ 211 $ 605
Less accrued
dividends on
preferred stock. (6) (6)
------- -------
Continuing
operations...... 205 3,198 $ (0.06) 599 3,178 $ 0.19
Loss from discon-
tinued operations. (125) 3,198 (0.04) -- 3,178 --
------- -------- ------- --------
BASIC $ 80 3,198 $ (0.02) $ 599 3,178 $ 0.19
======= ===== ======== ======= ===== ========
Effect of dilutive
securities (1):
Stock options... -- 20
Cumulative con-
vertible prefer-
red stock...... $ -- -- $ 6 37
------- ----- ------- -----
Continuing
operations...... 205 3,198 $ 0.06 605 3,235 $ 0.19
Loss from discon-
tinued
operations...... (125) 3,198 (0.04) -- 3,235 --
------- -------- ------- --------
DILUTED $ 80 3,198 $ 0.02 $ 605 3,235 $ 0.19
======= ===== ======== ======= ===== ========
(1) The assumed conversion of preferred shares to common shares and the stock options were anti-dilutive for the quarter and nine months ended September 30, 1999, and, therefore, were excluded from the calculation and reconciliation of Diluted Earnings (Loss) per Common Share for those periods.
Note 3: SHORT-TERM DEBT
In 1995 Ronson Consumer Products Corporation ("RCPC") entered into an agreement with Summit Bank ("Summit") for a Revolving Loan. On May 13, 1999, RCPC and Summit extended RCPC's Revolving Loan to June 30, 2002. The extended agreement also amended certain other terms of the Revolving Loan agreement. The Revolving Loan of $1,386,000 at September 30, 1999, is under a line of credit up to $2,500,000 to RCPC based on its accounts receivable and inventory.
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 was reduced in monthly amounts of $20,833 to June 1999 when it was fully amortized. With the extension of the Revolving Loan and the Mortgage Loan agreement refinancing on May 13, 1999 (refer to Note 4 below), Summit is providing additional loan availability of $196,000 to be amortized through June 30, 2000, at the rate of approximately $17,000 per month. The outstanding amount under the agreement for the additional available loan of $147,000 as of September 30, 1999, is included in the balance of the Revolving Loan in the paragraph above.
In 1995 Ronson Corporation of Canada, Ltd. ("Ronson-Canada") entered into an agreement with Canadian Imperial Bank of Commerce ("CIBC") for a line of credit of C$250,000. The agreement was extended to May 2000. The Revolving Loan balance of $116,000 (C$170,000) at September 30, 1999, of Ronson-Canada under the line of credit is secured by its accounts receivable and inventory. The Revolving Loan currently bears interest at the rate of 1.25% above CIBC's prime rate.
At September 30, 1999, Ronson Aviation, Inc. ("Ronson Aviation") had a note payable of $285,000 due to Summit which is collateralized by specific aircraft and is 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 4 below regarding the Term Loan). The Revolving Loan of $20,000 at September 30, 1999, is under a line of credit up to $400,000 to Ronson Aviation based on the level of its accounts receivable. On May 13, 1999, the Revolving Loan was extended for two years to June 30, 2002.
Note 4: LONG-TERM DEBT
On May 13, 1999, RCPC and Summit entered into an agreement, in the original amount of $1,760,000, which refinanced the existing Mortgage Loan agreement on the RCPC property. The Mortgage Loan balance was approximately $1,736,000 at September 30, 1999. The amended Mortgage Loan agreement provided for additional funds of $554,000, and is payable in sixty monthly installments of $17,218, including interest, with a final installment on May 1, 2004, of approximately $1,389,000. The loan bears interest at a fixed rate of 8.39%.
In August 1997 Ronson Aviation entered into a Term Loan agreement with Summit in the original amount of $285,000. The Term Loan is payable in monthly installments of $4,750 plus interest. On May 13, 1999, Ronson Aviation and Summit amended the Term Loan agreement to extend the payment terms for two years to June 30, 2002. The Term Loan balance was $171,000 at September 30, 1999.
Ronson Aviation has seven additional term loans payable to Summit with balances at September 30, 1999, totalling approximately $2,207,000. The loans are collateralized by specific aircraft.
In September 1998 Ronson Aviation entered into a Promissory Term Note agreement with Texaco Refining and Marketing, Inc. in the original amount of $250,000. The Promissory Term Note, with a balance of $232,000 at September 30, 1999, is payable in monthly installments of $2,775 including interest, through September 14, 2008. The Promissory Term Note bears interest at the rate of 6% per annum. The Promissory Term Note is secured by the leased premises of Ronson Aviation's new aircraft fueling facilities complex and all related equipment, and also contains restrictive covenants.
Note 5: CONTINGENCIES
In September 1998 the Company received a "de minimis" settlement offer ("Settlement Offer") from the United States Environmental Protection Agency ("USEPA") related to waste disposed of prior to 1980 at a landfill in Monterey Park, California, which the USEPA had 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. As a result, in August 1995 the Company received a General Notice Letter from the 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 at the Site. In 1981 the Company sold the Duarte, California, hydraulic subsidiary, Ronson Hydraulic Units Corporation ("RHUCOR-CA"), to the Boeing Corporation. The USEPA has notified a subsequent owner of the facility that the USEPA considers the subsequent owner also liable for the costs the USEPA determines to be due as a result of RHUCOR-CA's waste having been sent to the Site. The USEPA may also consider financial factors in determining the final amount due. In the fourth quarter of 1998 the Company offered to settle the matter for six equal payments totalling $90,000, to be paid semiannually over three years. Although the USEPA's Settlement Offer includes various options at costs of from $307,000 to $376,000 and the Company has offered to settle the matter for $90,000, the Company's final contribution, if any, is not yet determinable. The Company has accrued the amount of its offer and related expenses.
In February 1999 Ronson Aviation completed the installation of a new 58,500 gallon fueling facility at a total cost of approximately $430,000, and ceased use of most of its former underground storage tanks. The underground storage tanks formerly used by Ronson Aviation will be closed in place or removed in 1999 as required by the NJDEP. The extent of any soil and groundwater contamination cannot be determined until testing has been undertaken. Ronson Aviation has reached agreement with the lessor, the County of Mercer ("Mercer"), as to the allocation of responsibility for the costs of meeting regulatory requirements as to the former tank system because the former tanks are owned by Mercer and most of the tanks pre-date the lease between Ronson Aviation and Mercer. Under the agreement, the costs of all removal and reporting activities will be allocated such that 60% will be paid by Ronson Aviation and 40% will be paid by Mercer. Ronson Aviation has recorded a provision for the costs estimated for the removal and reporting activities. The allocation of costs related to groundwater contamination, if any is determined to be present, has not been determined. Since the extent of groundwater contamination, if any, and the associated costs cannot be estimated at this time, the effect on the Company's financial position or results of future operations cannot be estimated at this time. Management does not believe that the effect will be material.
In the third quarter of 1998, a mechanical failure at Ronson Aviation resulted in an overfill of a fuel tank and a release of about 700 gallons of jet fuel. The Company has taken appropriate action to address the release and to meet NJDEP requirements. Ronson Aviation has accrued projected future costs related to the release. Until all required remediation and sampling is completed, the total cost of the release cannot be determined. The Company's insurance carriers have been notified of the claim, and management believes that the Company will receive a reimbursement for the cost from insurance, but the Company has not recorded a receivable for that reimbursement.
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 6: INDUSTRY SEGMENTS INFORMATION
The Company has two reportable segments: consumer products and aviation services. The Company's reportable segments are strategic business units that offer different products and services.
Financial information by industry segment is summarized below (in thousands):
Quarter Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
Net sales:
Consumer Products $ 3,498 $ 4,007 $ 11,894 $ 11,614
Aviation Services 2,724 2,138 7,078 6,232
-------- -------- -------- ---------
Consolidated $ 6,222 $ 6,145 $ 18,972 $ 17,846
======== ======== ======== =========
Earnings (loss) from
operations:
Consumer Products $ 309 $ 650 $ 1,726 $ 1,859
Aviation Services 118 85 382 422
-------- -------- -------- ---------
Total reportable segments 427 735 2,108 2,281
Corporate and others (377) (440) (1,190) (1,223)
-------- -------- -------- ---------
Consolidated $ 50 $ 295 $ 918 $ 1,058
======== ======== ======== =========
Earnings (loss) from
continuing operations
before intercompany
charges and income taxes:
Consumer Products $ 242 $ 597 $ 1,559 $ 1,690
Aviation Services 6 30 106 233
-------- -------- -------- ---------
Total reportable segments 248 627 1,665 1,923
Corporate and others (435) (501) (1,365) (1,407)
-------- -------- -------- ---------
Consolidated $ (187) $ 126 $ 300 $ 516
======== ======== ======== =========
Note 7: COMPREHENSIVE INCOME
Comprehensive Income is the change in equity during a period from transactions and other events from nonowner sources. As required, the Company classifies items of other comprehensive income in financial statements and displays the accumulated balance of other comprehensive income (deficit) separately in the equity section of the Consolidated Balance Sheets.
Changes in the Components of Other Comprehensive Income (Loss) and in
Accumulated Other Comprehensive Deficit were as follows (in thousands):
Quarter Ended September 30, 1999 and 1998
------------------------------------------------------
Foreign Currency Minimum Pension Accumulated
Translation Liability Other Comprehensive
Adjustment Adjustment Deficit
--------------- -------------- -------------------
Balance at
June 30, 1999 $ (85) $ (964) $ (1,049)
Change during third
quarter 1999 (5) 13 8
--------- --------- ---------
Balance at
September 30, 1999 $ (90) $ (951) $ (1,041)
========= ========= =========
Balance at
June 30, 1998 $ (78) $ (1,463) $ (1,541)
Change during third
quarter 1998 (18) 41 23
--------- --------- ---------
Balance at
September 30, 1998 $ (96) $ (1,422) $ (1,518)
========= ========= =========
Nine Months Ended September 30, 1999 and 1998
------------------------------------------------------
Foreign Currency Minimum Pension Accumulated
Translation Liability Other Comprehensive
Adjustment Adjustment Deficit
--------------- -------------- -------------------
Balance at
December 31, 1998 $ (96) $ (990) $ (1,086)
Change during nine
months ended
September 30, 1999 6 39 45
--------- --------- ---------
Balance at
September 30, 1999 $ (90) $ (951) $ (1,041)
========= ========= =========
Balance at
December 31, 1997 $ (61) $ (1,545) $ (1,606)
Change during nine
months ended
September 30, 1998 (35) 123 88
--------- --------- ---------
Balance at
September 30, 1998 $ (96) $ (1,422) $ (1,518)
========= ========= =========
Note 8: 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 disclosures of cash flow information (in thousands):
Nine Months Ended
September 30,
-----------------
1999 1998
---- ----
Cash Payments for:
Interest $468 $479
Income taxes 68 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Third Quarter 1999 Compared to Third Quarter 1998 and Nine Months 1999 Compared to Nine Months 1998.
Ronson Corporation's (the "Company's") Net Sales increased in the third quarter of 1999 to $6,222,000 from $6,145,000 in the third quarter of 1998. For the nine months, the Company's Net Sales improved by 6% to $18,972,000 in 1999 from $17,846,000 in 1998.
The Company's third quarter 1999 Net Sales and Earnings from Operations were adversely affected by sales returns, lost sales, and costs related to a voluntary short-term withdrawal of the Company's Varaflame ignitor utility lighter from the Canadian market. In July, Health Canada issued a notice to Canadian distributors of seventeen utility lighters from various Far Eastern manufacturers prior to issuing a public warning to Canadian consumers. Ronson Corporation of Canada, Ltd.'s ("Ronson-Canada's") utility lighter was one of those seventeen lighters listed by Health Canada. Ignitor sales returns to Ronson-Canada in the third quarter 1999 totaled $71,000 as compared to net sales of $56,000 in the third quarter of 1998, a net sales decrease of $127,000. As a result of the above, the third quarter's operating earnings were reduced by about $115,000, excluding the effect of lost sales. We have cooperated fully with Health Canada. The Company expects to resume ignitor sales in Canada in the near future.
Operating earnings in the nine months of 1999 decreased to $918,000 from $1,058,000 in the nine months of 1998, with much of the decrease due to the short-term withdrawal of the ignitor from the Canadian market described above. After income taxes and interest, Earnings from Continuing Operations in the nine months of 1999 were $211,000 as compared to $605,000 in the nine months of 1998. The Earnings from Continuing Operations in the nine months of 1999 included an increase of $174,000 in deferred income tax expenses.
Ronson Consumer Products
------------------------
(in thousands)
Quarter Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
1999 1998 1999 1998
------- ------- ------- -------
Net sales $ 3,498 $ 4,007 $11,894 $11,614
Earnings from operations 309 650 1,726 1,859
Earnings before income taxes and
intercompany charges 242 597 1,559 1,690
Net Sales of consumer products at Ronson Consumer Products Corporation ("RCPC"), Woodbridge, New Jersey, and Ronson-Canada, Mississauga, Ontario, (together "Ronson Consumer Products") decreased by 13% in the third quarter of 1999 compared to the third quarter of 1998 primarily due to decreased sales of flame accessory products and the $127,000 sales reduction related to the Ronson-Canada utility lighter matter discussed above, partially offset by an increase of 97% in sales of the Ronii and Windii lighters in 1999's third quarter.
The Net Sales at Ronson Consumer Products increased by 2% in the nine months of 1999 compared to the nine months of 1998 primarily due to a 91% increase in sales of the Ronii and Windii lighter products partially offset by the reduction in ignitor sales in Canada in the third quarter of 1999. Sales of flame accessories increased slightly in the nine months of 1999.
Cost of Sales, as a percentage of Net Sales, at Ronson Consumer Products increased to 54% in the third quarter of 1999 from 51% in the third quarter of 1998 primarily due to costs of the short-term withdrawal of the ignitor from the Canadian market and to the lower sales of flame accessories in the third quarter of 1999. The Cost of Sales percentage was unchanged at 51% in the nine months of 1999 and 1998 because the costs of the ignitor matter were offset by the increased sales of the other products.
Selling, Shipping and Advertising Expenses, as a percentage of Net Sales, increased to 27% in the third quarter of 1999 from 23% in the third quarter of 1998 primarily due to the lower Net Sales in the third quarter of 1999. The Selling, Shipping and Advertising Expenses percentage was 24% in the nine months of 1999 compared to 23% in the nine months of 1998 primarily due to increased shipping and advertising expenses in 1999.
The Earnings from Operations at Ronson Consumer Products decreased to $309,000 in the third quarter of 1999 from $650,000 in the third quarter of 1998. Similarly, Earnings before Income Taxes and Intercompany Charges decreased in the third quarter of 1999 compared to the third quarter of 1998. The decrease in its earnings in the third quarter of 1999 was primarily due to the effects of the Ronson-Canada ignitor matter and the lower sales of flame accessory products. Earnings from Operations and Earnings before Income Taxes and Intercompany Charges decreased 7% and 8%, respectively, in the nine months of 1999 from the nine months of 1998. The decrease was due primarily to the Ronson-Canada utility lighter matter.
Ronson Aviation
---------------
(in thousands)
Quarter Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
1999 1998 1999 1998
------ ------ ------ ------
Net sales $2,724 $2,138 $7,078 $6,232
Earnings from operations 118 85 382 422
Earnings before income taxes and
intercompany charges 6 30 106 233
Net Sales at Ronson Aviation, Inc. ("Ronson Aviation"), Trenton, New Jersey, increased by 27% in the third quarter of 1999 from the third quarter of 1998, and by 14% in the nine months of 1999 from the nine months of 1998, primarily due to increased aircraft sales.
Ronson Aviation's Cost of Sales, as a percentage of Net Sales, increased to 84% in the third quarter of 1999 from 81% in the third quarter of 1998 and increased to 80% in the nine months of 1999 from 78% in the nine months of 1998. The increases in the Cost of Sales percentage in 1999 were primarily due to the change in mix of products sold; in particular, the increase in aircraft sales in 1999.
Ronson Aviation's Selling, Shipping and Advertising Expenses, as a percentage of Net Sales, were unchanged from the third quarter and nine months of 1998 to the third quarter and nine months of 1999. Ronson Aviation's General and Administrative Expenses, as a percentage of Net Sales, were reduced in the third quarter and nine months of 1999 and 1998 primarily due to increases in the Net Sales.
Income Taxes
The Loss from Continuing Operations in the third quarter of 1999 was net of deferred income tax benefits of $9,000. The Earnings from Continuing Operations in the nine months of 1999 were net of deferred income tax expenses of $62,000. The Earnings from Continuing Operations and Net Earnings in the third quarter and nine months of 1998 included deferred income tax benefits of $37,000 and $112,000, respectively. The results were increases in deferred income tax expenses of $28,000 and $174,000 in the third quarter and nine months of 1999, respectively, from the same periods in 1998.
Discontinued Operations
In the third quarter of 1999, Prometcor, Inc. ("Prometcor"), a discontinued operation, made further progress toward completion of its environmental cleanup and the eventual sale of the property. One of the original three Prometcor parcels was sold for $100,000 in August 1999. Prometcor also completed excavation of contaminated material in one of the two remaining parcels of the property. While making this progress in the third quarter, removal was required of more contaminated soil than previously estimated. On the positive side, this removal was important because it resolved a significant uncertainty as to the volume of contaminated material to be found below the ground level concrete floors of the buildings. This had been difficult to estimate prior to removal of the concrete floors. As a result of the additional anticipated disposal costs, the Company took an additional accrual of $190,000 resulting in a Loss from Discontinued Operations in the third quarter of 1999 of $125,000, net of $65,000 of deferred income tax benefits.
FINANCIAL CONDITION
The Company's Stockholders' Equity improved to $2,226,000 at September 30, 1999, from $2,145,000 at December 31, 1998. The improvement in 1999 Stockholders' Equity was primarily due to the Net Earnings in the nine months of 1999. The Company had a deficiency in working capital of $1,937,000 at September 30, 1999, as compared to $2,208,000 at December 31, 1998. The improvement of $271,000 in working capital was primarily due to the proceeds of $554,000 from the increase in the RCPC mortgage from Summit Bank ("Summit") in the first half of 1999.
In May 1999 the Company and its principal lender, Summit, reached agreement to amend the Revolving Loans, Mortgage Loan and Term Loan with RCPC and Ronson Aviation. The amendments included a new Mortgage Loan to RCPC which provided additional funds of $554,000 to RCPC and extended the expiration of the Mortgage Loan to May 1, 2004. The amendments also provided for extensions of the RCPC Revolving Loan, the Ronson Aviation Revolving Loan, and the Ronson Aviation Term Loan for two years to June 30, 2002. The RCPC Revolving Loan was amended to also provide an additional $196,000 in available borrowing, to be amortized through June 30, 2000. A substantial majority of the total of $750,000 in additional funds was utilized to meet the cash requirements of the Prometcor environmental clearance.
During the first half of 1999, Prometcor received clearance from the NRC and NJDEP to demolish the buildings on the Prometcor property which had not previously been released. The demolition was completed in April 1999. In August 1999 Prometcor completed the sale of a portion of its property for cash proceeds of about $100,000. Prometcor has entered into an agreement for the sale of the remainder of the property at a price of $495,000, subject only to the necessary environmental clearance. In the first six months of 1999, Prometcor completed a number of actions required for environmental clearance of the property. In the third quarter of 1999, Prometcor made further progress toward completion of its environmental cleanup. Prometcor completed excavation of contaminated material in one of the two remaining parcels of the property. While making this progress in the third quarter, removal was required of more contaminated soil than previously estimated. On the positive side, this removal was important because it resolved a significant uncertainty as to the volume of contaminated material to be found below the ground level concrete floors of the buildings. This had been difficult to estimate prior to removal of the concrete floors. As a result of the additional anticipated disposal costs, the Company took an additional accrual of $190,000 resulting in a Loss from Discontinued Operations in the third quarter of 1999 of $125,000, net of $65,000 of deferred income tax benefits. Prometcor expended over $1,100,000 in the nine months of 1999 to complete these activities. As a result, the Current Liabilities of Discontinued Operations were reduced by $869,000 in the nine months of 1999. The full extent of the costs and time required for completion is not determinable until the remediation and confirmation testing of the properties have been completed and accepted by the NJDEP and NRC.
In the third quarter of 1999, the Company filed a lawsuit against several of its former general liability insurance carriers. (Refer to Item 1 of Part II below.) The suit seeks recovery for environmental investigation and remediation costs incurred and anticipated at various locations, primarily Prometcor. Based on statements by the Company's counsel (who have undertaken the matter such that legal fees will be on a contingency basis), the Company believes that a sound basis exists to anticipate that recovery will likely be made of a substantial portion of costs related to groundwater contamination in New Jersey and potentially for other environmental costs. No provisions for this potential recovery have been made in the Company's financial statements.
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.
YEAR 2000 ISSUES
The Company's information technology systems have been reviewed for Year 2000 ("Y2K") readiness, and actions have been taken to update all material systems. The information technology systems used at Ronson Aviation were recently acquired and have been certified Y2K compliant. The necessary upgrades to the information technology systems utilized by the Company and Ronson Consumer Products have been acquired and successfully tested. The implementation of these upgraded systems is substantially complete.
The Company has also reviewed its non-information technology systems. The Company believes there are no material concerns. This assessment includes Ronson Aviation's aircraft and related equipment.
The Company has assessed its material relationships with third parties. Based on information received from the Company's third parties, the Company believes that those third parties with which the Company has a material relationship will not be disrupted by any Y2K issues.
The majority of the costs to address the Company's Y2K issues have been incurred and have not been material. Any costs remaining are not expected to be material.
Because of the current status of the Company's preparations related to the Y2K issues, the Company does not believe there is a material risk of losses related to the Y2K issues.
For those systems for which compliance has not yet been demonstrated, the Company is developing contingency plans even though none of those systems are material to the Company's operations.
FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Results of Operations and Financial Condition and other sections of this report contain forward-looking statements that anticipate results based on management's plans that are subject to uncertainty. The use of the words "expects", "plans", "anticipates" and other similar words in conjunction with discussions of future operations or financial performance identifies these statements.
Forward-looking statements are based on current expectations of future events. The Company cannot ensure that any forward-looking statement will be accurate, although the Company believes that it has been reasonable in its expectations and assumptions. Investors should realize that if underlying assumptions prove inaccurate or that unknown risks or uncertainties materialize, actual results could vary materially from our projections. The Company assumes no obligation to update any forward-looking statements as a result of future events or developments.
Investors are cautioned not to place undue reliance on such statements that speak only as of the date made. Investors also should understand that it is not possible to predict or identify all such factors and should not consider this to be a complete statement of all potential risks and uncertainties.
PART II - OTHER INFORMATION
Ronson Corporation v. The Home Indemnity Company, et al.
The Company is the plaintiff in a lawsuit pending in the Superior Court of New Jersey Law Division: Essex County, in which the company seeks reimbursement from its former liability insurance carriers for costs related to environmental investigation and cleanup. Based on statements of the Company's counsel, management believes that a sound basis exists to anticipate that a substantial recovery, the amount of which cannot be estimated at this time, will be made from its former insurance carriers.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
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: November 15, 1999
/s/Louis V. Aronson II
------------------------------
Louis V. Aronson II, President
and Chief Executive Officer(Signing as Duly Authorized
Officer of the Registrant)
Date: November 15, 1999
/s/Daryl K. Holcomb
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Daryl K. Holcomb, Vice President
and Chief Financial Officer,
Controller and Treasurer(Signing as Chief Financial
Officer of the Registrant)
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