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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549-1004
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
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 (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)
(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 [_]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 126-2 of the Exchange Act). Yes [_] No [X]
As of October 31, 2002, there were 3,659,210 shares of the registrant's common
stock, $1.00 par value outstanding.
RONSON CORPORATION
FORM 10-Q INDEX
---------------
2
PAGE
PART I - FINANCIAL INFORMATION:
ITEM 1 - FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS:
SEPTEMBER 30, 2002 AND DECEMBER 31, 2001 3
CONSOLIDATED STATEMENTS OF OPERATIONS:
QUARTER ENDED SEPTEMBER 30, 2002 AND 2001 4
NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
CONSOLIDATED STATEMENTS OF CASH FLOWS: 5
NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 12
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 16
ITEM 4 - CONTROLS AND PROCEDURES
PART II - OTHER INFORMATION:
ITEM 1 - LEGAL PROCEEDINGS 16
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 16
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 17
EXHIBIT INDEX 18
SIGNATURES 19
CERTIFICATIONS PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002 20
3
PART 1- FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
----------------------------------------------------
(in thousands of dollars)
September 30, December 31,
2002 2001
-------- --------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 303 $ 689
Accounts receivable, net 1,685 1,723
Inventories:
Finished goods 2,576 1,422
Work in process 114 55
Raw materials 474 361
-------- --------
3,164 1,838
Other current assets 891 953
Current assets of discontinued operations 226 325
-------- --------
TOTAL CURRENT ASSETS 6,269 5,528
-------- --------
Property, plant and equipment, at cost:
Land 19 19
Buildings and improvements 4,734 4,648
Machinery and equipment 6,852 6,075
Construction in progress 94 114
-------- --------
11,699 10,856
Less accumulated depreciation and amortization 7,242 6,763
-------- --------
4,457 4,093
Other assets 1,535 1,548
Other assets of discontinued operations 1,080 1,458
-------- --------
$ 13,341 $ 12,627
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ 1,950 $ 858
Current portion of long-term debt and leases 315 377
Accounts payable 2,119 1,593
Accrued expenses 2,190 1,940
Current liabilities of discontinued operations 363 527
-------- --------
TOTAL CURRENT LIABILITIES 6,937 5,295
-------- --------
Long-term debt and leases 2,354 2,730
Other long-term liabilities 1,054 1,730
STOCKHOLDERS' EQUITY:
Common stock 3,726 3,520
Additional paid-in capital 29,256 29,221
Accumulated deficit (26,878) (26,671)
Accumulated other comprehensive loss (1,511) (1,602)
-------- --------
4,593 4,468
Less cost of treasury shares 1,597 1,596
-------- --------
TOTAL STOCKHOLDERS' EQUITY 2,996 2,872
-------- --------
$ 13,341 $ 12,627
======== ========
See notes to consolidated financial statements.
4
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
------------------------------------------------------------
(in thousands of dollars, except per share data) (unaudited)
Quarter Ended
September 30,
--------------------------
2002 2001
---- ----
NET SALES $ 5,421 $ 6,517
------- -------
Cost and expenses:
Cost of sales 3,394 4,111
Selling, shipping and advertising 847 802
General and administrative 1,015 995
Depreciation and amortization 179 187
------- -------
5,435 6,095
------- -------
EARNINGS (LOSS) FROM OPERATIONS (14) 422
------- -------
Other expense:
Interest expense 82 134
Other-net 21 30
------- -------
103 164
------- -------
EARNINGS (LOSS) BEFORE INCOME
TAX PROVISION (BENEFIT) (117) 258
Income tax provision (benefit) (38) 86
------- -------
NET EARNINGS (LOSS) $ (79) $ 172
======= =======
EARNINGS (LOSS) PER COMMON SHARE:
Basic $ (0.02) $ 0.05
======= =======
Diluted $ (0.02) $ 0.05
======= =======
See notes to consolidated financial statements.
5
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,
------------------------
2002 2001
---- ----
NET SALES $ 16,733 $ 19,678
-------- --------
Cost and expenses:
Cost of sales 10,360 12,307
Selling, shipping and advertising 2,543 2,601
General and administrative 3,097 3,080
Depreciation and amortization 498 565
-------- --------
16,498 18,553
-------- --------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INTEREST AND OTHER ITEMS 235 1,125
-------- --------
Other expense:
Interest expense 255 435
Other-net 69 89
-------- --------
324 524
-------- --------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAX PROVISION (BENEFIT) (89) 601
Income tax provision (benefit) (25) 194
-------- --------
EARNINGS (LOSS) FROM CONTINUING OPERATIONS (64) 407
Earnings from discontinued operations
(net of income tax provision of $115) 170 --
-------- --------
NET EARNINGS $ 106 $ 407
======== ========
NET EARNINGS (LOSS) PER COMMON SHARE:
Basic:
Earnings (loss) from continuing operations $ (0.02) $ 0.11
Earnings from discontinued operations 0.05 --
-------- --------
Net earnings $ 0.03 $ 0.11
======== ========
Diluted:
Earnings (loss) from continuing operations $ (0.02) $ 0.11
Earnings from discontinued operations 0.05 --
-------- --------
Net earnings $ 0.03 $ 0.11
======== ========
See notes to consolidated financial statements.
6
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------------
(in thousands of dollars, except per share data) (unaudited)
Nine Months Ended
September 30,
----------------------
2002 2001
---- ----
Cash Flows from Operating Activities:
Net earnings $ 106 $ 407
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 498 565
Deferred income tax expenses 71 206
Decrease in cash from changes in
current assets and current liabilities (868) (640)
Net change in pension-related accounts (86) 146
Discontinued operations 186 (194)
Other (34) 12
------- -------
Net cash provided by (used in) operating activities (127) 502
------- -------
Cash Flows from Investing Activities:
Net cash used in investing activities,
capital expenditures (816) (447)
------- -------
Cash Flows from Financing Activities:
Proceeds from short-term debt 1,092 840
Proceeds from issuance of common stock 38 --
Payments of preferred dividends (73) --
Payments of short-term debt -- (480)
Payments of long-term debt (440) (339)
Payments of long-term lease obligations (24) (22)
Other (36) (36)
------- -------
Net cash provided by (used in) financing activities 557 (37)
------- -------
Net increase (decrease) in cash and cash equivalents (386) 18
Cash and cash equivalents at beginning of period 689 81
------- -------
Cash and cash equivalents at end of period $ 303 $ 99
======= =======
See notes to consolidated financial statements.
7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
FOR THE QUARTER ENDED SEPTEMBER 30, 2002 (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, 2002 and 2001, is
unaudited. In the opinion of management, all adjustments (consisting only of
normal recurring 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,
----------------------------------------------------------
2002 2001
-------------------------- ------------------------------
Per Per
Share Share
Loss Shares Amount Earnings Shares(2) Amt.(2)
------ ------ ------ -------- --------- -------
Net earnings (loss) . . . $ (79) $ 172
Less accrued dividends on
preferred stock . . . . (2) (2)
-------- --------
BASIC (81) 3,635 $(0.02) 170 3,629 $ 0.05
====== ======
Effect of dilutive
securities (1):
Stock options . . . . . -- 8
Cumulative convertible
preferred stock. . . . -- -- 2 37
-------- ----- -------- -----
DILUTED $ (81) 3,635 $(0.02) $ 172 3,674 $ 0.05
======== ===== ====== ======== ===== ======
8
Nine Months Ended September 30,
----------------------------------------------------------
2002 2001
-------------------------- ------------------------------
Per Per
Earnings Share Share
(Loss) Shares Amount Earnings Shares(2) Amt.(2)
------ ------ ------ -------- --------- -------
Earnings (loss) from
continuing operations . $ (64) $ 407
Less accrued dividends on
preferred stock . . . . (5) (5)
-------- --------
Continuing operations . . (69) 3,630 $(0.02) 402 3,629 $ 0.11
Earnings from discontinued
operations. . . . . . . 170 3,630 0.05 -- 3,629 --
-------- ------ -------- ------
BASIC $ 101 3,630 $ 0.03 $ 402 3,629 $ 0.11
======== ===== ====== ======== ===== ======
Effect of dilutive
securities (1):
Stock options . . . . . -- --
Cumulative convertible
preferred stock. . . . $ -- -- $ -- --
-------- ----- -------- -----
Continuing operations . . (69) 3,630 $(0.02) 402 3,629 $ 0.11
Earnings from discontinued
operations. . . . . . . 170 3,630 0.05 -- 3,629 --
-------- ------ -------- ------
DILUTED $ 101 3,630 $ 0.03 $ 402 3,629 $ 0.11
======== ===== ====== ======== ===== ======
(1) The assumed conversion of preferred shares to common shares and the stock
options were anti-dilutive for the third quarter 2002 and the nine-month
periods of 2002 and 2001, and, therefore, were excluded from the
computation and reconciliation of Diluted Earnings (Loss) per Common Share
for those periods.
(2) Information as to the number of shares and per share amounts has been
retroactively adjusted to reflect the 5% stock dividend on common stock
issued April 15, 2002.
Note 3: SHORT-TERM DEBT
---------------
In 1995 Ronson Consumer Products Corporation ("RCPC") entered into an
agreement with Fleet Capital Corporation ("Fleet") for a Revolving Loan. On June
30, 2002, RCPC and Fleet extended RCPC's Revolving Loan to June 30, 2005. The
extended agreement also amended certain other terms of the Revolving Loan
agreement. The Revolving Loan of $983,000 at September 30, 2002, provides a line
of credit up to $2,500,000 to RCPC based on accounts receivable and inventory.
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 Revolving Loan balance of $37,000 (C$59,000) at
September 30, 2002, of Ronson-Canada under the line of credit is secured by its
accounts receivable and inventory.
9
At September 30, 2002, Ronson Aviation, Inc. ("Ronson Aviation") had a
note payable of $930,000 due to Raytheon Aircraft Credit Corp. The note is
collateralized by a specific aircraft, and the note is to be repaid from the
proceeds from the sale of the aircraft.
In 1997 Ronson Aviation entered into an agreement with Fleet for a
Revolving Loan. On June 30, 2002, the Revolving Loan was extended for three
years to June 30, 2005. The Revolving Loan provides a line of credit up to
$500,000 to Ronson Aviation based on the level of its accounts receivable. At
September 30, 2002, Ronson Aviation utilized no borrowings under the Revolving
Loan.
Note 4: LONG-TERM DEBT
--------------
In May 1999 the Company, RCPC and Fleet entered into a loan agreement, in
the original amount of $1,760,000, which refinanced an existing Mortgage Loan
agreement on the RCPC property in Woodbridge, New Jersey. The Mortgage Loan
balance was $1,534,000 at September 30, 2002, and is payable in sixty monthly
installments of $17,218, including interest, and a final installment on May 1,
2004.
Ronson Aviation has two term loans payable to Fleet with balances at
September 30, 2002, totaling approximately $1,029,000. The loans are
collateralized by specific aircraft. On June 30, 2002, Ronson Aviation and Fleet
amended a term loan to extend the payment terms to June 30, 2005.
Note 5: CONTINGENCIES
-------------
In 1999 Ronson Aviation completed the installation of a new fueling
facility and ceased use of most of its former underground storage tanks. The
primary underground fuel storage tanks formerly used by Ronson Aviation were
removed in 1999 as required by the New Jersey Department of Environmental
Protection ("NJDEP"). Related contaminated soil was removed and remediated. In
2000 initial groundwater tests were completed. Ronson Aviation's environmental
consultants have advised the Company that preliminary results of that testing
indicate that no further actions should be required. The extent of groundwater
contamination cannot be determined until final testing has been completed and
accepted by the NJDEP. The Company intends to vigorously pursue its rights under
the leasehold and under the statutory and regulatory requirements. Since the
amount of additional costs, if any, and their ultimate allocation cannot be
fully determined at this time, the effect on the Company's financial position or
results of future operations cannot yet be determined, but management believes
that the effect will not be material.
The Company is involved in a State of New Jersey Gross Income Tax audit
for the years ended December 31, 1997 through December 31, 2000. The total
claimed by the State of New Jersey is $144,000, related to availability of net
operating loss carryforwards from 1995. The Company has appealed the
determination by the New Jersey Division of Taxation. Based on statements of the
Company's counsel in the matter, management believes that the Company will not
be liable for the assessment. The Company has accrued the expected cost of
defense in the matter.
The Company is involved in various lawsuits, tax audits, 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
10
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,
2002 2001 2002 2001
---- ---- ---- ----
Net sales:
Consumer Products $ 3,458 $ 3,859 $10,576 $11,797
Aviation Services 1,963 2,658 6,157 7,881
------- ------- ------- -------
Consolidated $ 5,421 $ 6,517 $16,733 $19,678
======= ======= ======= =======
Earnings (loss) from operations:
Consumer Products $ 200 $ 558 $ 679 $ 1,475
Aviation Services 288 299 1,037 974
------- ------- ------- -------
Total reportable segments 488 857 1,716 2,449
Corporate and others (502) (403) (1,481) (1,292)
Non-recurring loss -- (32) -- (32)
------- ------- ------- -------
Consolidated $ (14) $ 422 $ 235 $ 1,125
======= ======= ======= =======
Earnings (loss) from continuing
operations before intercompany
charges and income taxes:
Consumer Products $ 171 $ 507 $ 587 $ 1,315
Aviation Services 273 250 984 803
------- ------- ------- ------
Total reportable segments 444 757 1,571 2,118
Corporate and others (561) (467) (1,660) (1,485)
Non-recurring loss -- (32) -- (32)
------- ------- ------- -------
Consolidated $ (117) $ 258 $ (89) $ 601
======= ======= ======= =======
Note 7: COMPREHENSIVE INCOME
--------------------
Comprehensive Income is the change in equity during a period from
transactions and other events from nonowner sources. The Company is required to
classify items of other comprehensive income in financial statements and to
display the accumulated balance of other comprehensive income (loss) separately
in the equity section of the Consolidated Balance Sheets.
11
Changes in the components of Other Comprehensive Income (Loss) and in
Accumulated Other Comprehensive Loss were as follows (in thousands):
Quarter Ended September 30, 2002 and 2001
-----------------------------------------
Foreign Currency Minimum Pension Accumulated
Translation Liability Other Comprehensive
Adjustment (1) Adjustment (2) Loss
-------------- -------------- -------------------
Balance at
June 30, 2002 $ (61) $ (1,469) $ (1,530)
Change in period (19) 52 33
Tax effect 7 (21) (14)
---------- --------- ---------
Balance at
September 30, 2002 $ (73) $ (1,438) $ (1,511)
========== ======== =========
Balance at
June 30, 2001 $ (54) $ (994) $ (1,048)
Change in period (13) 33 20
Tax effect 5 (14) (9)
---------- --------- ---------
Balance at
September 30, 2001 $ (62) $ (975) $ (1,037)
========== ========= =========
Nine Months Ended September 30, 2002 and 2001
---------------------------------------------
Foreign Currency Minimum Pension Accumulated
Translation Liability Other Comprehensive
Adjustment (1) Adjustment (2) Loss
-------------- -------------- -------------------
Balance at
December 31, 2001 $ (70) $ (1,532) $ (1,602)
Change in period (4) 157 153
Tax effect 1 (63) (62)
---------- --------- ---------
Balance at
September 30, 2002 $ (73) $ (1,438) $ (1,511)
========== ========= =========
Balance at
December 31, 2000 $ (58) $ (1,035) $ (1,093)
Change in period (6) 100 94
Tax effect 2 (40) (38)
---------- --------- ---------
Balance at
September 30, 2001 $ (62) $ (975) $ (1,037)
========== ========= =========
(1) The foreign currency translation adjustment component of Accumulated Other
Comprehensive Loss is presented above net of related tax benefits of
$48,000 and $41,000 as of September 30, 2002 and 2001, respectively,
$41,000 and $36,000 as of June 30, 2002 and 2001, respectively, and $47,000
and $39,000 as of December 31, 2001 and 2000, respectively.
(2) The minimum pension liability component of Accumulated Other Comprehensive
Loss is presented above net of related tax benefits of $956,000 and
$648,000 as of September 30, 2002 and 2001, respectively, $977,000 and
$662,000 as of June 30, 2002 and 2001, respectively, and $1,019,000 and
$688,000 as of December 31, 2001 and 2000, respectively.
12
Note 8: STATEMENTS OF CASH FLOWS
------------------------
Certificates of deposit that have a maturity of less than 90 days are
considered cash equivalents for purposes of the accompanying Consolidated
Statements of Cash Flows.
Supplemental disclosures of cash flow information are as follows (in
thousands):
Nine Months Ended
September 30,
------------------
2002 2001
---- ----
Cash Payments for:
Interest $ 286 $ 411
Income Taxes 2 10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
------------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
RESULTS OF OPERATIONS
- ---------------------
Third Quarter 2002 Compared to Third Quarter 2001 and Nine Months 2002 Compared
to Nine Months 2001.
The Company's Net Sales were $5,421,000 in the third quarter of 2002 as
compared to $6,517,000 in the third quarter of 2001 and were $16,733,000 in the
nine months of 2002 as compared to $19,678,000 in the nine months of 2001.
The Company's Net Earnings in the nine months of 2002 were $106,000
compared to $407,000 in the nine months of 2001. The Net Earnings in the nine
months of 2002 included Earnings from Discontinued Operations of $170,000 due to
income from an environmental insurance settlement.
Ronson Consumer Products
- ------------------------
(in thousands)
Quarter Ended Nine Months Ended
September 30, September 30,
-------------- ---------------
2002 2001 2002 2001
---- ---- ---- ----
Net sales $ 3,458 $ 3,859 $10,576 $11,797
Earnings from operations 200 558 679 1,475
Earnings before income taxes and
intercompany charges 171 507 587 1,315
Net Sales of consumer products at Ronson Consumer Products Corporation
("RCPC"), Woodbridge, New Jersey, and Ronson Corporation of Canada Ltd.
("Ronson-Canada"), Mississauga, Ontario, (together "Ronson Consumer Products")
decreased by 10% in the third quarter of 2002 compared to the third quarter of
2001 and in the nine months of 2002 compared to the nine months of 2001
primarily due to decreased sales of flame accessory products.
Reclassifications have been made of certain of last year's amounts to
conform with the current year's presentation required in accordance with EITF
13
Issue No. 00-25. Effective January 1, 2002, certain selling expenses incurred by
Ronson Consumer Products are classified as reductions in Net Sales, in lieu of
as selling or advertising expenses. There is no effect on earnings, and the
impact on Ronson Consumer Products' Net Sales is not material.
Cost of Sales, as a percentage of Net Sales, at Ronson Consumer
Products increased to 59% in the third quarter of 2002 from 54% in the third
quarter of 2001 and to 59% in the nine months of 2002 from 55% in the nine
months of 2001. These increases in the Cost of Sales percentage were due
primarily to the lower sales and to increased packaging costs on certain
products for a major customer.
Selling, Shipping and Advertising Expenses at Ronson Consumer Products,
as a percentage of Net Sales, increased to 24% in the third quarter and nine
months of 2002 from 21% in the third quarter of 2001 and 22% in the nine months
of 2001 primarily due to the lower sales in 2002. General and Administrative
Expenses, as a percentage of Net Sales, in the third quarters and nine months of
2002 and 2001 were unchanged at 9%.
Interest Expense at Ronson Consumer Products was reduced by $16,000 to
$28,000 in the third quarter of 2002 from $44,000 in the third quarter of 2001
and by $58,000 to $83,000 in the nine months of 2002 from $141,000 in the nine
months of 2001 primarily due to lower interest rates.
Ronson Aviation
- ---------------
(in thousands)
Quarter Ended Nine Months Ended
September 30, September 30,
-------------- ---------------
2002 2001 2002 2001
---- ---- ---- ----
Net sales $ 1,963 $ 2,658 $ 6,157 $ 7,881
Earnings from operations 288 299 1,037 974
Earnings before income taxes and
intercompany charges 273 250 984 803
Non-recurring loss -- (32) -- (32)
Net Sales at Ronson Aviation, Inc. ("Ronson Aviation"), Trenton, New
Jersey, decreased by 26% in the third quarter of 2002 from the third quarter of
2001 and by 22% in the nine months of 2002 from the nine months of 2001. These
decreases were primarily because there were no aircraft sales in 2002 and
because the Net Sales in the third quarter and nine months of 2001 included
sales of charter services on Ronson Aviation's two C-99 aircraft, which were
sold in the fourth quarter of 2001. The non-recurring items in the third quarter
and nine months of 2001 pertained to costs related to sales of these two Ronson
Aviation C-99 aircraft.
Ronson Aviation's Cost of Sales, as a percentage of Net Sales, was
reduced to 69% in the third quarter of 2002 and to 67% in the nine months of
2002 from 76% in the third quarter of 2001 and 74% in the nine months of 2001.
The decreases in the Cost of Sales percentage in 2002 were primarily due to
improved gross profit margins on certain products and to the change in the mix
of products and services sold.
Ronson Aviation's Selling, Shipping and Advertising Expenses and
General and Administrative Expenses, as a percentage of Net Sales, increased to
10% in the third quarter of 2002 from 9% in the third quarter of 2001 and to 11%
in the nine
14
months of 2002 from 10% in the nine months of 2001 primarily due to the lower
sales in 2002.
Interest Expense at Ronson Aviation was reduced by $32,000 to $16,000
in the third quarter of 2002 from $48,000 in the third quarter of 2001 and by
$113,000 to $55,000 in the nine months of 2002 from $168,000 in the nine months
of 2001 primarily due to lower interest rates in 2002 and to reduced debt
because of the fourth quarter 2001 sale of the two C-99 aircraft.
Other Items
- -----------
The General and Administrative Expenses of Corporate and Other were
higher in the third quarter and nine months of 2002 as compared to the third
quarter and nine months of 2001 primarily due to significantly higher pension
expense as the result of increased amortization related to the lower valuation
of pension assets in 2001.
Discontinued Operations
- -----------------------
On March 6, 2002, the Company reached settlement with the last
insurance carrier in the Company's 1999 lawsuit to recover incurred and
anticipated environmental cleanup costs, primarily relating to the Company's
discontinued Prometcor operations. The Company had settled with the other
insurance carriers in 2000 and 2001. This last settlement amounted to $600,000,
bringing total recoveries to over $1.8 million. As a result of this final
settlement, the Company had Earnings and depreciation from Discontinued
Operations of $285,000 after related expenses and before income taxes ($170,000
after taxes) in the nine months of 2002.
FINANCIAL CONDITION
The Company's Stockholders' Equity improved to $2,996,000 at September
30, 2002, from $2,872,000 at December 31, 2001. The improvement of $124,000 in
Stockholders' Equity was primarily due to the Net Earnings in the nine months of
2002. The Company had a deficiency in working capital of $668,000 at September
30, 2002, as compared to working capital of $233,000 at December 31, 2001. The
decline in working capital was primarily due to three factors: a reduction in
the long-term pension obligation by $694,000, Ronson Aviation's replacement of
an engine on its Citation II charter aircraft of about $400,000 and a reduction
in the non-current portion of long-term debt and leases of $376,000, partially
offset by the Company's Net Earnings and depreciation in the nine months of
2002.
In the nine months of 2002, Finished Goods Inventory and Short-term
Debt increased due to Ronson Aviation's receiving delivery of an aircraft for
resale in the third quarter of 2002. In the nine months of 2001, Finished Goods
Inventory and Short-term Debt also increased due to Ronson Aviation's receiving
delivery of an aircraft for resale in the third quarter of 2001.
In the nine months of 2002, the Company's machinery and equipment
increased by $777,000 primarily due to Ronson Aviation's replacement of an
engine on its Citation II charter aircraft at a cost of about $400,000.
15
In the nine months of 2002, the Company's Accounts Payable and Accrued
Expenses increased from December 31, 2001, primarily due to the timing of
purchases and payments.
In the first quarter of 2002, the Company completed the environmental
clearance of Prometcor's Newark, NJ, property. The property was released for
sale in March 2002 by the New Jersey Department of Environmental Protection.
Closing on the sale of the property under an existing sale agreement was
completed in the second quarter of 2002. The reduction in Other Assets of
Discontinued Operations from December 31, 2001, to September 30, 2002, was
primarily due to the sale of the property.
In the second quarter of 2002, the Company reached agreement with its
principal lender, Fleet Business Capital ("Fleet") extending: 1) Fleet's lines
of credit with RCPC and Ronson Aviation, and 2) certain of Fleet's term loans to
Ronson Aviation related to the Citation II jet. The lines of credit and term
loans were extended by three years from their prior expiration dates to June 30,
2005. The revised terms of the agreements provide for reduced interest rates to
prime plus 1% from prime plus 1-1/2%. For the lines of credit, these rate
reductions are upon attainment of certain financial ratios. The revised
agreements also eliminate and revise various financial covenants.
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 financial arrangements, potential additional sources of
financing and existing cash balances.
FORWARD-LOOKING STATEMENTS
- --------------------------
This Management's Discussion and Analysis of Financial Condition and
Results of Operations 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.
16
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
There has been no significant change in the Company's exposure to
market risk during the first nine months of 2002. For discussion of the
Company's exposure to market risk, refer to Item 7A, Quantitative and
Qualitative Disclosure about Market Risk, contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 2001, which is incorporated
herein by reference.
ITEM 4 - CONTROLS AND PROCEDURES
-----------------------
(a) Evaluation of Disclosure Controls and Procedures. The Company's Chief
Executive Officer and Chief Financial Officer, after the evaluation of the
effectiveness of the Company's "disclosure controls and procedures" (as defined
in Rules 13a-4(c) and 15-14(c) under the Securities Exchange Act of 1934) as of
a date (the "Evaluation Date") within 90 days before the filing date of this
quarterly report, have concluded that, as of the Evaluation Date, the Company's
disclosure controls and procedures were adequate and designed to ensure that
material information related to the Company and its consolidated subsidiaries
would be made known to them.
(b) Changes in Internal Controls. There were no significant changes in the
Company's internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
-----------------
Gary Minnich, Margaret Minnich & Royal and Sunalliance vs. Ronson
-----------------------------------------------------------------
Consumer Products Corporation and Wal-Mart Stores East, Inc.
- --------------------------------------------------------------
The Company is the defendant in a product liability lawsuit pending in
the District Court for the District of Maryland, in which Plaintiffs have
alleged that a cigarette lighter ignited the clothing of Gary Minnich in
February 1999 and have alleged substantial damages occurred. The Company was
notified of the lawsuit in June 2002. Discovery has not been completed, and,
therefore, the Company's counsel is unable to render a final opinion in this
matter. However, counsel for the Company has advised that substantial defenses
exist and is vigorously defending this litigation. Management believes that the
claim is without merit and a loss, if any, would be well within the limits of
insurance coverage.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
(a) At the Company's Annual Stockholders' Meeting (the "Meeting") on
September 12, 2002, the matters set forth in the Company's 2002 Notice of
Meeting and Proxy Statement, which is incorporated herein by reference, were
submitted to the Company's stockholders.
(b) Messrs. Louis V. Aronson II and I. Leo Motiuk were elected as Class
III directors for three-year terms by 76.7% or more of the votes cast at the
Meeting.
17
(c) The appointment of Demetrius & Company, L.L.C., independent
auditors, to audit the consolidated financial statements of the Company for the
year 2002 was ratified by 88.2% of the votes cast at the Meeting.
(d) A stockholder proposal was rejected by about 68% of the votes cast
at the Meeting.
The number of affirmative votes, negative votes and abstentions on each
matter is set forth below:
1. ELECTION OF DIRECTORS
Class III (terms expire at 2005 Annual Meeting of Stockholders):
FOR % WITHHOLD %
--- --- -------- ---
Louis V. Aronson II 2,620,474 76.7 798,036 23.3
I. Leo Motiuk 2,633,248 77.0 785,262 23.0
2. To ratify the appointment of DEMETRIUS & COMPANY, L.L.C., as independent
auditors for the year 2002.
FOR % AGAINST % ABSTAIN %
--- --- ------- --- ------- ---
3,013,870 88.2 397,300 11.6 7,340 0.2
3. To consider a Stockholder Proposal, unanimously opposed by the Board of
Directors and Management a portion of which reads as follows: "RESOLVED,
that the stockholders of Ronson Corporation request the Board of Directors
to redeem as soon as practicable the preferred stock purchase rights issued
under its Rights Agreement dated December 8, 1998."
FOR % AGAINST % ABSTAIN %
--- --- ------- --- ------- ---
830,161 31.8 1,776,149 52.0 6,397 0.2
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits.
(99)(a) Certification of Louis V. Aronson II, the Principal
Executive Officer of the Company, and Daryl K. Holcomb, the Principal Financial
Officer of the Company , pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
On August 30, 2002, the Company filed a report on Form 8-K with
the Securities and Exchange Commission in response to Item 9 of such report. No
financial statements or pro forma financial information was included in this
report.
18
EXHIBIT INDEX
QUARTERLY REPORT ON FORM 10-Q
Exhibit
No. Description
------- ------------
99(a) Certification of Louis V. Aronson, II, the Principal Executive
Officer of the Company, and Daryl K. Holcomb, the Principal
Financial Officer of the Company, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
19
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 14, 2002 /s/ Louis V. Aronson II
---------------------------------
Louis V. Aronson II, President
& Chief Executive Officer
(Signing as Duly Authorized
Officer of the Registrant)
Date: November 14, 2002 /s/ Daryl K. Holcomb
---------------------------------
Daryl K. Holcomb, Vice President
& Chief Financial Officer,
Controller & Treasurer
(Signing as Chief Financial
Officer of the Registrant)
20
CERTIFICATION
I, Louis V. Aronson II, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Ronson
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report fairly present in all
material respects the financial condition, results of operations, and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a. All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
21
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 14, 2002 /s/ Louis V. Aronson II
------------------------
Louis V. Aronson II
President and C.E.O.
22
CERTIFICATION
I, Daryl K. Holcomb, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Ronson
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report fairly present in all
material respects the financial condition, results of operations, and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
a. Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b. Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c. Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a. All significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b. Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
23
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 14, 2002 /s/ Daryl K. Holcomb
------------------------
Daryl K. Holcomb
Vice President and C.F.O.
24