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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 March 31, 2004
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Commission File Number 1-1031
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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
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(Address of principal executive offices)
(732) 469-8300
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(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 12b-2 of the Exchange Act). Yes |_| No |X|
As of April 30, 2004, there were 4,055,490 shares of the registrant's common
stock outstanding.
RONSON CORPORATION
FORM 10-Q INDEX
PAGE
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PART I - FINANCIAL INFORMATION:
ITEM 1 - FINANCIAL STATEMENTS:
CONSOLIDATED BALANCE SHEETS:
MARCH 31, 2004 AND DECEMBER 31, 2003 3
CONSOLIDATED STATEMENTS OF OPERATIONS:
QUARTER ENDED MARCH 31, 2004 AND 2003 4
CONSOLIDATED STATEMENTS OF CASH FLOWS:
QUARTER ENDED MARCH 31, 2004 AND 2003 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 12
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 14
ITEM 4 - CONTROLS AND PROCEDURES 14
PART II - OTHER INFORMATION:
ITEM 1 - LEGAL PROCEEDINGS 15
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 16
SIGNATURES 17
2
3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
--------------------
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
----------------------------------------------------
(in thousands of dollars)
March 31, December 31,
2004 2003
----------- ------------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 998 $ 664
Accounts receivable, net 1,609 2,198
Inventories:
Finished goods 2,815 1,495
Work in process 25 25
Raw materials 444 383
----------- -----------
3,284 1,903
Other current assets 1,113 1,183
----------- -----------
TOTAL CURRENT ASSETS 7,004 5,948
----------- -----------
Property, plant and equipment, at cost:
Land 6 6
Buildings and improvements 5,271 4,782
Machinery and equipment 7,462 7,232
Construction in progress 50 53
----------- -----------
12,789 12,073
Less accumulated depreciation and amortization 8,183 8,029
----------- -----------
4,606 4,044
Other assets 2,644 2,611
----------- -----------
$ 14,254 $ 12,603
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt $ 1,359 $ 847
Current portion of long-term debt and leases 380 325
Accounts payable 2,255 1,632
Accrued expenses 2,686 2,683
Current liabilities of discontinued operations 321 324
----------- -----------
TOTAL CURRENT LIABILITIES 7,001 5,811
----------- -----------
Long-term debt and leases 2,384 1,946
Other long-term liabilities 1,074 1,371
STOCKHOLDERS' EQUITY:
Common stock 4,129 4,128
Additional paid-in capital 29,497 29,510
Accumulated deficit (26,497) (26,770)
Accumulated other comprehensive loss (1,737) (1,796)
----------- -----------
5,392 5,072
Less cost of treasury shares 1,597 1,597
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 3,795 3,475
----------- -----------
$ 14,254 $ 12,603
=========== ===========
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
March 31,
----------------------------
2004 2003
---- ----
NET SALES $ 7,049 $ 5,838
----------- -----------
Cost and expenses:
Cost of sales 4,329 3,793
Selling, shipping and advertising 831 789
General and administrative 1,159 1,127
Depreciation and amortization 169 164
----------- -----------
6,488 5,873
----------- -----------
EARNINGS (LOSS) FROM OPERATIONS 561 (35)
----------- -----------
Other expense:
Interest expense 72 87
Other-net 11 12
----------- -----------
83 99
----------- -----------
EARNINGS (LOSS) BEFORE INCOME TAXES 478 (134)
Income tax provision (benefit) 203 (62)
----------- -----------
NET EARNINGS (LOSS) $ 275 $ (72)
=========== ===========
EARNINGS (LOSS) PER COMMON SHARE:
Basic $ 0.07 $ (0.02)
=========== ===========
Diluted $ 0.07 $ (0.02)
=========== ===========
See notes to consolidated financial statements.
5
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
----------------------------------------------------
(in thousands of dollars) (unaudited)
Quarter Ended
March 31,
-----------------------------
2004 2003
---- ----
Cash Flows from Operating Activities:
Net earnings (loss) $ 275 $ (72)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization 169 164
Deferred income tax expense (benefit) 196 (76)
Increase in cash from changes in current
assets and current liabilities (228) 543
Net change in pension-related accounts (101) 5
Other (190) (23)
----------- -----------
Net cash provided by operating activities 121 541
----------- -----------
Cash Flows from Investing Activities:
Net cash used in investing activities,
capital expenditures (633) (70)
----------- -----------
Cash Flows from Financing Activities:
Proceeds from short-term debt 916 --
Proceeds from long-term debt 440 --
Payments of short-term debt (404) (174)
Payments of long-term debt (75) (71)
Payments of long-term lease obligations (17) (9)
Other (14) (14)
----------- -----------
Net cash provided by (used in)
financing activities 846 (268)
----------- -----------
Net increase in cash and cash equivalents 334 203
Cash and cash equivalents at beginning of period 664 312
----------- -----------
Cash and cash equivalents at end of period $ 998 $ 515
=========== ===========
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 2004 (UNAUDITED)
Note 1: ACCOUNTING POLICIES
Basis of Financial Statement Presentation - The information as of and for
the three months ended March 31, 2004 and 2003, 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.
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 March 31,
-----------------------------------------------------------------------
2004 2003
---------------------------------- ------------------------------
Per Per
Share Share
Earnings Shares Amount Loss Shares(2) Amount
-------- ------ ------ ---- --------- ------
Net earnings (loss) .............. $ 275 $ (72)
Less accrued dividends on
preferred stock ................ (2) (2)
------- -------
BASIC $ 273 4,055 $0.07 $ (74) 4,033 $(0.02)
======= ======= ===== ======= ======= ======
Effect of dilutive
securities (1):
Stock options .................. 68 --
Cumulative convertible
preferred stock ............... $ 2 40 $ -- --
------- ------- ------- -------
DILUTED $ 273 4,163 $0.07 $ (74) 4,033 $(0.02)
======= ======= ===== ======= ======= ======
(1) The assumed conversion of preferred shares to common shares and the
stock options were anti-dilutive for the quarter ended March 31,
2003, and, therefore, were excluded from the computation and
reconciliation of Diluted Earnings (Loss) per Common Share for that
period.
(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 declared February 12, 2004.
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, now
expiring on June 30, 2005. The Revolving Loan provides a line of credit up to
6
$2,500,000 to RCPC based on accounts receivable and inventory. At March 31,
2004, RCPC utilized no borrowings under the Revolving Loan.
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. Ronson-Canada's line of credit is secured by its accounts
receivable and inventory. At March 31, 2004, Ronson-Canada utilized no
borrowings under the Revolving Loan.
In 1997 Ronson Aviation, Inc. ("Ronson Aviation") entered into an
agreement with Fleet for a Revolving Loan. The Revolving Loan provides a line of
credit up to $500,000 to Ronson Aviation based on the level of its accounts
receivable. At March 31, 2004, Ronson Aviation utilized no borrowings under the
Revolving Loan.
At March 31, 2004, Ronson Aviation had notes payable of $1,359,000 due to
Raytheon Aircraft Credit Corp. The notes are collateralized by specific aircraft
included in finished goods inventories and are to be repaid from the proceeds
from the sale of the aircraft.
Note 4: LONG-TERM DEBT
On December 1, 2003, the Company, RCPC and Fleet amended the Company's
Mortgage Loan, extending the expiration to December 1, 2008. The Mortgage Loan
balance was $1,408,000 at March 31, 2004. The Mortgage Loan agreement is payable
in monthly installments of $7,951, plus interest, with a final installment on
December 1, 2008, of approximately $962,000. The loan bears interest at the rate
of 0.5% above Fleet's prime rate. The Company and Fleet have entered into an
interest rate swap contract which effectively fixes the interest rate on the
Mortgage Loan at 7.45%.
Ronson Aviation has two term loans payable to Fleet with balances at March
31, 2004, totaling approximately $736,000. The loans are collateralized by
specific aircraft and expire on June 30, 2005.
In March 2004 a lease agreement became effective for a warehouse facility
utilized by RCPC for finished goods storage and product shipments. In connection
with the lease, the landlord provided improvements totaling $440,000. The
landlord has provided RCPC with a long-term loan for the improvements, bearing
interest at 8.25%, payable at $4,800 per month, including interest, with a final
payment of $150,000 due at the end of the initial nine-year term, and secured by
a letter of credit in the amount of $150,000.
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
7
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.
In 2002 Prometcor completed the environmental clearance of its property in
Newark, N.J. The final parcel of the property was sold in May 2002 with the
Company retaining responsibility for the groundwater-related activities. The
Company's plan to resolve groundwater issues has not yet been approved by the
NJDEP. Related costs will be incurred over an extended number of years. In
calculating and accruing these costs, the Company has discounted the costs to
the present value. The liability for these estimated costs and expenses as
recorded in the financial statements was based, in accordance with normal
accounting practices, on the lower limit of the range of costs as projected by
the Company and its consultants. The estimated upper limit of the range of costs
is approximately $600,000 above the lower limit. The full extent of the costs
and time required for completion of the NJDEP environmental clearance is not
determinable until the remediation and confirmatory testing of the properties
have been completed and accepted by the NJDEP.
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. 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 shareholder litigation, and the Company
incurred approximately $510,000 in net legal costs related to the matter in 2003
and the first quarter of 2004. These costs were net of the associated insurance
reimbursement of about $430,000. The Company believes that its directors' and
officers' liability insurance coverage is adequate to meet the future direct
costs of the litigation; however, the Company is not able to estimate at this
time the extent to which it will incur additional legal or other expenses, which
may be substantial, in connection with this proceeding.
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: PREFERRED STOCK
On February 12, 2004, the Company's Board of Directors approved the
redemption of the 34,875 shares of the Company's 12% Cumulative Convertible
Preferred Stock which remained outstanding. In accordance with the terms of the
preferred stock, the redemption price is $2.25 per share. The Company expects
the redemption to be completed on May 31, 2004. Prior to its redemption, the
preferred stock will continue to be convertible into common stock, at the rate
of 1.157625 common shares per preferred share, after adjustment for the 5% stock
dividend payable April 15, 2004. Fractional shares of common stock issuable upon
8
conversion will be paid for in cash at $2.71 per common share, the closing
market price of the Company's common stock on April 15, 2004.
Note 7: 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 March 31,
-----------------------
2004 2003
---- ----
Net sales:
Consumer Products $ 4,749 $ 3,608
Aviation Services 2,300 2,230
--------- ---------
Consolidated $ 7,049 $ 5,838
========= =========
Earnings (loss) from operations:
Consumer Products $ 767 $ 318
Aviation Services 351 219
--------- ---------
Total reportable segments 1,118 537
Corporate and others (507) (552)
Other charges (50) (20)
--------- ---------
Consolidated $ 561 $ (35)
========= =========
Earnings (loss) before intercompany
charges and income taxes:
Consumer Products $ 756 $ 293
Aviation Services 332 197
--------- ---------
Total reportable segments 1,088 490
Corporate and others (560) (604)
Other charges (50) (20)
--------- ---------
Consolidated $ 478 $ (134)
========= =========
Note 8: 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.
9
Changes in the components of Other Comprehensive Loss (Income) and in
Accumulated Other Comprehensive Loss (Income) were as follows (in thousands):
Foreign Currency Minimum Accumulated Other
Translation Pension Comprehensive
Adjustments Liability Loss
----------- --------- ----
Balance at December 31, 2003 $ 12 $ 1,784 $ 1,796
Current period change (31) (66) (97)
Income tax expense 12 26 38
--------- --------- ---------
Balance at March 31, 2004 $ (7) $ 1,744 $ 1,737
========= ========= =========
Balance at December 31, 2002 $ 70 $ 2,071 $ 2,141
Current period change (24) (73) (97)
Income tax expense 9 29 38
--------- --------- ---------
Balance at March 31, 2003 $ 55 $ 2,027 $ 2,082
========= ========= =========
Note 9: 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):
Quarter Ended
March 31,
-----------------------
2004 2003
---- ----
Cash payments for:
Interest ................. $ 82 $ 75
Income taxes ............. 20 --
Financing & Investing Activities
Not Affecting Cash:
Capital lease obligations
incurred 145 --
Note 10: RETIREMENT PLANS
The Company's Consolidated Statements of Operations included pension
expense consisting of the following components (in thousands):
Quarter Ended March 31,
-----------------------
2004 2003
---- ----
Service cost $ 6 $ 6
Interest cost 69 67
Expected return on plan assets (40) (33)
Recognized actuarial losses 66 73
Recognized prior service cost 4 5
----- -----
Net pension expense $ 105 $ 118
===== =====
10
Contributions to the pension plan during 2004 are expected as follows (in
thousands):
Paid in the quarter ended March 31, 2004 $ 204
Expected to be paid in the balance of 2004 478
-----
Total expected to be paid in the year ending December 31, 2004 $ 682
=====
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- --------------------------------------------------------------------
AND RESULTS OF OPERATIONS
- -------------------------
RESULTS OF OPERATIONS
First Quarter 2004 Compared to First Quarter 2003.
The Company's Net Sales increased 21% to $7,049,000 in the first quarter
of 2004 as compared to $5,838,000 in the first quarter of 2003. The Company's
Net Earnings increased by $347,000 in the first quarter of 2004 to $275,000 as
compared to a Net Loss of $72,000 in the first quarter of 2003. The Company's
Operating Earnings ("Earnings before Other Charges, Interest, Other Items and
Income Taxes") increased by $626,000 in the first quarter of 2004 to $611,000
from a loss of $15,000 in the first quarter of 2003.
Ronson Consumer Products
(in thousands)
Quarter Ended
March 31,
--------------------
2004 2003
---- ----
Net sales $ 4,749 $ 3,608
Earnings from operations 767 318
Earnings before income taxes and
intercompany charges 756 293
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")
increased by 32% in the first quarter of 2004 compared to the first quarter of
2003 primarily due to increased sales of flame accessory products and to sales
of the new Ronson Tech Torch which began in the second quarter of 2003.
Cost of Sales, as a percentage of Net Sales, at Ronson Consumer Products
decreased to 57% in the first quarter of 2004 from 59% in the first quarter of
2003 due primarily to the increased sales in 2004.
Selling, Shipping and Advertising Expenses at Ronson Consumer Products, as
a percentage of Net Sales, decreased to 17% in the first quarter of 2004 from
22% in the first quarter of 2003 primarily due to the increased sales in 2004
and to a reduction in the portion of sales subject to commissions. General and
Administrative Expenses, as a percentage of Net Sales, were reduced to 8% in the
first quarter of 2004 from 9% in the first quarter of 2003 primarily due to the
increased sales in 2004.
11
Ronson Aviation
(in thousands)
Quarter Ended
March 31,
--------------------
2004 2003
---- ----
Net sales $ 2,300 $ 2,230
Earnings from operations 351 219
Earnings before income taxes and
intercompany charges 332 197
Net Sales at Ronson Aviation, Inc. ("Ronson Aviation"), Trenton, New
Jersey, increased by 3% in the first quarter of 2004 from the first quarter of
2003 primarily due to increased sales of aircraft fuel partially offset by
reduced sales of aircraft maintenance services.
Ronson Aviation's Cost of Sales, as a percentage of Net Sales, decreased
to 70% in the first quarter of 2004 from 75% in the first quarter of 2003. The
decrease in the Cost of Sales percentage in 2004 was primarily due to the higher
fuel sales in 2004.
Ronson Aviation's Selling, Shipping and Advertising Expenses and General
and Administrative Expenses were reduced to 10% in the first quarter of 2004
compared to 11% in the first quarter of 2003 primarily due to the increased
sales in 2004.
Other Items
The General and Administrative Expenses of Corporate and Other were lower
in the first quarter of 2004 as compared to the first quarter of 2003 primarily
due to reduced personnel costs and to lower pension expense.
The Other Charges in the first quarter of 2004 and 2003 of $50,000 and
$20,000, respectively, were the legal fees incurred related to stockholder
litigation. (Refer to Item 1 of Part II of this Form 10-Q.)
FINANCIAL CONDITION
The Company's Stockholders' Equity increased to $3,795,000 at March 31,
2004, from $3,475,000 at December 31, 2003. The increase of $320,000 in
Stockholders' Equity was primarily due to the Net Earnings in the first quarter
of 2004. The Company had working capital of $3,000 at March 31, 2004, as
compared to $137,000 at December 31, 2003. The decline in working capital was
primarily due to a reduction in the long-term pension obligation by $303,000 and
to deposits of $250,000 on equipment to be leased, partially offset by the Net
Earnings in 2004.
The increase in Buildings and Improvements and in Long-Term Debt in the
first quarter of 2004 were primarily due to the leasehold improvements of
$440,000 at RCPC's newly-leased warehouse. The leasehold improvements were
financed by the lessor.
Finished Goods Inventories and Short-Term Debt increased in the first
quarter of 2004 due to the delivery of an aircraft to Ronson Aviation, at a cost
of $946,000, for resale. At March 31, 2004, the Short-term Debt consisted solely
of two notes payable for two aircraft in Ronson Aviation's inventory. At March
31, 2004, the Company utilized no borrowings under its revolving loans.
12
Accounts Payable increased to $2,255,000 at March 31, 2004, from
$1,632,000 at December 31, 2003, due to the timing of purchases and payments.
Capital Expenditures and Proceeds from Long-Term Debt included the
leasehold improvements of $440,000 of RCPC's newly-leased finished goods
warehouse financed by the lessor.
On February 12, 2004, the Company's Board of Directors declared a 5% stock
dividend on the Company's common stock. The 5% stock dividend was issued on
April 15, 2004, to stockholders of record April 1, 2004. Information as to the
number of shares and per share amounts has been retroactively adjusted to
reflect this stock dividend.
On May 7, 2004, the Company's Board of Directors declared a regular
quarterly cash dividend on common stock of $.01 per common share. The cash
dividend is payable on June 18, 2004, to stockholders of record June 1, 2004.
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 involve risks and uncertainties, as well as assumptions that, if
they never materialize or prove incorrect, could cause the results of the
Company to differ materially from those expressed or implied by such
forward-looking statements. All statements other than statements of historical
fact are statements that could be deemed forward-looking statements, including
any projections of earnings, revenue, margins, costs or other financial items;
any statements of the plans, strategies and objectives of management for future
operations; any statement concerning new products, services or developments; any
statements regarding future economic conditions or performance; any statements
of belief; and any statements of assumptions underlying any of the foregoing.
The risks, uncertainties and assumptions referred to above include the success
of new products; competition; prices of key materials, such as petroleum
products; the challenge of managing asset levels, including inventory; the
difficulty of aligning expense levels with revenue changes; assumptions relating
to pension costs; and other risks that are described herein and that are
otherwise described from time to time in the Company's Securities and Exchange
Commission reports. The Company assumes no obligation and does not intend to
update these forward-looking statements.
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 three months of 2004. 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, 2003, incorporated herein by reference.
13
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
the end of the period covered by this quarterly report, have concluded that, as
of that 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
-----------------
Steel Partners II, L.P., et al v. Louis V. Aronson II, Robert A. Aronson,
- -------------------------------------------------------------------------
Erwin M. Ganz, I. Leo Motiuk, Gerard J. Quinnan, Justin P. Walder,
- ------------------------------------------------------------------
Saul H. Weisman, Carl W. Dinger III and Ronson Corporation
- ----------------------------------------------------------
On March 25, 2003, a derivative lawsuit was filed against the directors of
Ronson in the Superior Court of New Jersey, Chancery Division, Essex County by
Steel Partners II, L.P. and Warren G. Lichtenstein. The lawsuit alleges, among
other matters, breach of fiduciary duty and an absence of disinterestedness by
the defendants, and use of corporate control to advance their own interests. The
lawsuit seeks monetary damages on behalf of Ronson as well as equitable relief
to invalidate the Company's shareholder rights agreement and certain consulting
agreements, to enjoin performance of agreements with certain directors and to
require the Company's President and C.E.O. to divest those shares acquired, and
not to acquire additional shares while the shareholder rights agreement has been
or remains in place. A special committee of two independent directors was
created by the Board of Directors of the Company to investigate and evaluate the
allegations made in the lawsuit. The committee concluded that none of the
directors breached any fiduciary duty owed to the Company or its shareholders,
that it is not in the best interests of the Company or its shareholders to
continue legal action against the directors on any of the claims asserted in the
derivative complaint and that the Company seek to dismiss the derivative action.
The Company's directors have vigorously denied the claims and have moved to have
the complaint dismissed. That motion to dismiss was denied in February 2004. The
Company's directors will continue to contest and to vigorously defend against
the claims.
Ronson Corporation, Louis V. Aronson II, Robert A. Aronson, Erwin M. Ganz,
- --------------------------------------------------------------------------
Gerard J. Quinnan, and Justin P. Walder v. Steel Partners II, L.P., Steel
- -------------------------------------------------------------------------
Partners, L.L.C., Warren G. Lichtenstein, Jack Howard, Howard M. Lorber, Ronald
- -------------------------------------------------------------------------------
Hayes, Travis Bradford, et al
- -----------------------------
In June 2003 the Company and certain members of its Board of Directors
filed a complaint in the United States District Court, District of New Jersey,
against Steel Partners II, L.P., Steel Partners L.L.C., Warren G. Lichtenstein,
and
14
others (i) claiming that Steel Partners II, L.P., Steel Partners L.L.C., and
others acting in concert with them had failed to comply with their disclosure
obligations under the federal securities law, and thereby violated Section 13D
of the Securities Exchange Act of 1934, as amended, (ii) seeking a declaration
that the defendants have beneficial ownership in excess of twelve percent of the
Company's common stock and, accordingly, are an "acquiring person" as defined in
the Company's shareholder rights agreement, (iii) seeking a further declaration
that defendants are an "interested stockholder" for purposes of the New Jersey
Shareholders Protection Act, and, accordingly, are subject to specified
prohibitions there under and (iv) seeking damages for defendants alleged
tortious interference with the Company's prospective economic advantage. Several
of the named defendants have moved to dismiss the complaint, which motion was
granted in December 2003 on the basis of the Court's conclusion that plaintiff's
federal securities claims were "time-barred" by the statute of limitations, and
the Court declined to exercise jurisdiction over the plaintiffs' state law
claims. The merits of the complaint were not considered by the Court. Plaintiffs
have filed an appeal with respect to the decision, and the plaintiffs will
vigorously pursue their rights in this litigation.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits.
31.1(a) and (b) Rule 13a-14(a)/15d-14(a) Certifications
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Section 1350 Certification pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (furnished but not filed for purposes of the
Securities Exchange Act of 1934).
(b) Reports on Form 8-K.
The Company filed a report on Form 8-K with the Securities and
Exchange Commission dated January 29, 2004, in response to Item 5 of such
report. No financial statements or pro forma financial information were included
in this report.
The Company filed a report on Form 8-K with the Securities and
Exchange Commission dated February 2, 2004, in response to Item 5 of such
report. No financial statements or pro forma financial information were included
in this report.
The Company filed a report on Form 8-K with the Securities and
Exchange Commission dated February 18, 2004, in response to Item 5 of such
report. No financial statements or pro forma financial information were included
in this report.
The Company filed a report on Form 8-K with the Securities and
Exchange Commission dated April 27, 2004, in response to Item 5 of such report.
No financial statements or pro forma financial information were included in this
report.
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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 14, 2004 /s/ Louis V. Aronson II
-------------------------------
Louis V. Aronson II, President
& Chief Executive Officer
(Signing as Duly Authorized
Officer of the Registrant)
Date: May 14, 2004 /s/ Daryl K. Holcomb
-------------------------------
Daryl K. Holcomb, Vice President
& Chief Financial Officer,
Controller and Treasurer
(Signing as Chief Financial
Officer of the Registrant)
16