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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____ .
Commission File No. 1-1031
RONSON CORPORATION
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(Exact name of registrant as specified in its charter)
NEW JERSEY 22-0743290
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(State of incorporation) (IRS Employer Identification No.)
CAMPUS DRIVE, P.O. BOX 6707, SOMERSET, N.J. 08875
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (732) 469-8300
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Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock par value Nasdaq SmallCap Market
$1.00 per share
12% Cumulative Convertible Over-the-Counter Bulletin Board
Preferred Stock
No par value
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
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (229.505 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant was $5,771,670 as of March 10, 1999.
As of March 10, 1999, there were 3,197,142 shares of the registrant's
common stock outstanding.
TABLE OF CONTENTS
Part I
Item 1. Business.
2. Properties.
3. Legal Proceedings.
4. Submission of Matters to a Vote of Security Holders.
Part II
Item 5. Market for the Company's Common Stock
and Related Stockholder Matters.
6. Selected Financial Data.
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
8. Financial Statements and Supplementary Data.
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Part III
Item 10. Directors and Executive Officers of the Company.
11. Executive Compensation.
12. Security Ownership of Certain Beneficial
Owners and Management.
13. Certain Relationships and Related Transactions.
Part IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K.
PART I
Item 1 - BUSINESS
(a) General development of business.
The Registrant, Ronson Corporation (the "Company"), is a company
incorporated in 1928 engaged principally in the following businesses:
1. Consumer Products; and
2. Aviation-Fixed Wing Operations and Services and Helicopter
Services.
On October 2, 1995, the Company's common shares were listed on
the Nasdaq SmallCap Market, and on December 1, 1995, the Company's
preferred shares were listed on the Nasdaq SmallCap Market. The
Company's common shares are quoted under the symbol RONC and its
preferred shares are quoted under the symbol RONCP.
On November 15, 1996, the Company issued an offer to exchange up
to 1,423,912 aggregate shares of its common stock for all of the 837,595
issued and outstanding shares of its 12% Cumulative Convertible
Preferred Stock. For each share of preferred stock exchanged, the
Company offered to issue 1.7 shares of common stock. The terms and
conditions of the offer were more fully described in the Offering
Circular and the accompanying Letter of Transmittal dated November 15,
1996, (together the "Exchange Offer") which are incorporated herein by
reference. The Company's Exchange Offer expired on September 30, 1997.
After the expiration of the Offer, the Company had accepted 800,844
shares of preferred stock in exchange and had issued 1,361,435 shares of
common stock under the Company's Exchange Offer.
At the time of the termination of the Exchange Offer on
September 30, 1997, there were about 37,000 shares of preferred stock
remaining outstanding. Because the number of remaining outstanding
preferred shares no longer met the NASDAQ minimum requirement of 100,000
outstanding shares in order to be listed on the Nasdaq SmallCap Market,
the Company's preferred stock was delisted from the Nasdaq SmallCap
Market. Immediately upon the delisting of the preferred shares from the
Nasdaq SmallCap Market, the preferred shares were listed on the NASD
Over-the-Counter ("OTC") Bulletin Board.
In December 1989 the Company adopted a plan to discontinue the
operations of Ronson Metals Corporation, Newark, New Jersey, one of the
Company's wholly owned subsidiaries. On January 8, 1997, Ronson Metals
Corporation amended its Certificate of Incorporation to change its
corporation name to Prometcor, Inc. ("Prometcor"). Prometcor had sizable
losses in several years prior to 1987 with reduced losses continuing in
1987 through 1989. In 1990 operations ceased at Prometcor and Prometcor
began complying with the New Jersey Industrial Site Recovery Act
("ISRA"), formerly ECRA, and all other applicable laws. As part of the
plan to sell the properties of the Prometcor discontinued operations,
Prometcor has also been involved in termination of its United States
Nuclear Regulatory Commission ("NRC") license. Compliance with ISRA and
NRC requirements has continued through 1998 and into 1999. (See
Environmental Matters below and Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations.)
(b) Financial information about industry segments.
In lieu of the revenue and profit information required
pursuant to Item 101(b) of Regulation S-K as to the Company's lines of
business, the revenue and profit data with respect to the Company's
reportable industry segments is included in Note 13 of the Notes to
Consolidated Financial Statements furnished pursuant to Item 8 below,
which are incorporated herein by reference.
(c) Narrative description of business.
(1) Consumer Products
The Company's consumer packaged products, which are
manufactured in Woodbridge, New Jersey, and distributed in the United
States by the Company's wholly owned subsidiary, Ronson Consumer
Products Corporation ("RCPC"), include Ronsonol lighter fluid,
Multi-Fill butane fuel injectors, flints, wicks for lighters, a
multi-use penetrant spray lubricant product under the tradename
"Multi-Lube", a spot remover under the product tradename "Kleenol", and
a surface protectant under the tradename "GlossTek". In addition, the
Company's consumer packaged products are marketed in Canada through
Ronson Corporation of Canada, Ltd. ("Ronson-Canada"), a wholly owned
subsidiary of the Company. RCPC and Ronson-Canada together comprise
Ronson Consumer Products. The Company also distributes its consumer
products in Mexico. A subsidiary of WalMart Stores, Inc. ("WalMart") is
a significant distributor for the consumer products segment and, as
such, supplies Ronson's products to numerous retailers. Management does
not believe that this segment is substantially dependent on WalMart or
its distributor subsidiary because of the presence of many other
distributors which provide retailers with Ronson's consumer products.
Sales to various units of WalMart in 1998 and 1997 accounted for 12% and
10%, respectively, of Consolidated Net Sales of the Company and 18% and
15% of Net Sales of the segment in 1998 and 1997, respectively, most of
which were to its distributor subsidiary.
The consumer products are distributed through distributors,
food brokers, automotive and hardware representatives and mass
merchandisers, drug chains and convenience stores in the United States
and Canada. Ronson Consumer Products is a principal supplier of packaged
flints and lighter fuels in the United States and Canada. These
subsidiaries' consumer products face substantial competition from other
nationally distributed products and from numerous local and private
label packaged products. Since Ronson Consumer Products produces
packaged products in accordance with its sales forecasts, which are
frequently reviewed and revised, inventory accumulation has not been a
significant factor, and this segment does not have a significant order
backlog. The sources and availability of raw materials for this
segment's packaged products are not significant factors.
Ronson Consumer Products also distributes three lighter
products - the "RONII" refillable butane lighter, the Ronson "WINDII"
liquid fuel windproof lighter, and the Ronson "Varaflame Ignitor", used
for lighting fireplaces, barbecues, camping stoves and candles. The
lighter products are marketed in the United States, Canada and Mexico.
In 1995 Ronson Consumer Products introduced a new lighter
product, the RONII refillable butane lighter, in both the United States
and Canada. The RONII is a pocket lighter that meets the new child
resistant requirements issued by the Consumer Product Safety Commission.
The RONII is manufactured for the Company in Spain and is sold through
the Company's distribution channels. The RONII is priced competitively
but has strong competition from several other brands of disposable
lighters and unbranded imports from China and other Far Eastern
countries.
In January 1997 Ronson Consumer Products introduced a new
lighter product, the WINDII windproof lighter, in the United States and
Canada. The WINDII uses Ronson flints, Ronsonol lighter fuel and Ronson
wicks. The WINDII faces strong competition from other nationally
distributed brands and from unbranded imports.
The WINDII lighter and Varaflame Ignitor are manufactured in
China, both in accordance with the design specifications of the Company.
The Company has the exclusive right to market these products in the
United States, Canada and Mexico, and does so through its distribution
channels. The Varaflame Ignitor is refillable with Ronson butane refills
and is less expensive than most other refillable ignitors. The Varaflame
Ignitor encounters strong competition from imported disposable ignitors.
(2) Aviation - Fixed Wing Operations and Services and Helicopter
Services
Ronson Aviation, Inc. ("Ronson Aviation"), a wholly owned
subsidiary of the Company, headquartered at Trenton-Mercer Airport,
Trenton, New Jersey, provides a wide range of general aviation services
to the general public and to government agencies. Services include air
charter, air cargo, cargo handling, avionics, management aviation
services, new and used aircraft sales, aircraft repairs, aircraft
fueling, storage and office rental. This subsidiary's facility is
located on 18 acres, exclusive of four acres on which Ronson Aviation
has a first right of refusal, and includes a 52,000 square foot
hangar/office complex, two aircraft storage units ("T" hangars) and a
58,500 gallon fuel storage complex (refer to Item 2-Properties, (4)
Trenton, New Jersey). In its passenger and cargo services, Ronson
Aviation operates a total of three aircraft, including a Citation Jet
and two twin-engine turbo-prop airplanes in charter operations. Ronson
Aviation is an FAA approved repair station for major and minor airframe
and engine service and an avionics repair station for service and
installations. Ronson Aviation is an authorized Raytheon Aircraft and
Parts Sales and Service Center and a customer service facility for Bell
Helicopter Textron.
At December 31, 1998, Ronson Aviation had one new aircraft
in sales inventory and orders to purchase three new aircraft from
Raytheon Aircraft Corporation, all of which are for resale. The total
sales value of these aircraft is approximately $1,835,000. The orders
are subject to cancellation by Ronson Aviation.
Ronson Aviation is subject to extensive competition in its
air charter activities, but Ronson Aviation is the only provider of
aviation services to the private, corporate and commercial flying public
at Trenton-Mercer Airport in Trenton, New Jersey.
ENVIRONMENTAL MATTERS
In the conduct of certain of its manufacturing operations,
the Company is required to comply with various environmental statutes
and regulations concerning the generation, storage and disposal of
hazardous materials. Additionally under ISRA, operators of particular
facilities classified as industrial establishments are required to
ensure that their property complies with environmental laws, including
implementation of remedial action, if necessary, before selling or
closing a facility. The Company's New Jersey facilities would be subject
to ISRA should a facility be closed or sold.
In December 1989 the Company adopted a plan to discontinue
the operations in 1990 of one of its facilities, Prometcor, located in
Newark, New Jersey, and to comply with ISRA (formerly ECRA) and all
other applicable laws. In October 1994 Prometcor entered into a
Memorandum of Agreement with the New Jersey Department of Environmental
Protection ("NJDEP") as to its NJDEP related environmental compliance
activities respecting its Newark facility. In November 1994 Prometcor
submitted a Preliminary Assessment, Site Investigation and Remedial
Investigation Report ("PA/SI/RIR") to the NJDEP following extensive
testing. The NJDEP approved Prometcor's PA/SI/RIR in the first quarter
of 1995. Prometcor completed the actions required under the approved
PA/SI/RIR and, in June 1995, submitted its Remedial Action
WorkPlan/Remedial Action Report ("RAW/RAR") to the NJDEP. As the result
of the continuation of sampling and evaluation of the results by the
Company's environmental consultants and the NJDEP in 1996 and in the
first quarter of 1997, areas of contamination in the groundwater below a
section of the property were identified. Sampling and delineation have
been and are continuing in this area of the property.
Prometcor has also proceeded with reporting to the NRC in
order to terminate the NRC license held by Prometcor. In 1996 through
1998 Prometcor's radiological consultants performed additional sampling
and submitted additional reports to the Company and to the NRC. As a
result of the evaluation of the sampling results by the Company's
radiological consultant and in consideration of comments from the NRC,
low-level contamination was identified and delineated in certain
sections of the Prometcor property.
In the second quarter of 1998, the Company's consultants
completed additional testing. Based on the results of certain of these
tests and on discussions with parties interested in the properties, the
Company determined, in the third quarter of 1998, to demolish the
buildings. The preparation for the demolition required additional
testing for final clearance to verify and to supplement the results of
previous consultants. This further testing and significant,
unanticipated cleanup were required and completed in January 1999. The
NRC and NJDEP accepted the results of the testing for one of the two
buildings in February 1999 and acceptance of the results of the testing
for the other is expected in the next 30 days, approving the demolition
of the buildings. The demolition is in progress and is expected to be
completed in April 1999.
The Company's plan for final radiological remediation and
clearance of the soils was approved by the NRC in November 1998 and by
the NJDEP in February 1999. The implementation of this plan will follow
the completion of the demolition of the buildings. The Company's plan
regarding resolving the non-radiological issues in the soil has been
approved by the NJDEP and will be implemented after the demolition has
been completed. The Company's plan to resolve the groundwater issue has
not yet been approved by the NJDEP.
A portion of the Newark property has already been released
by the NRC and the NJDEP. In November 1997 Prometcor completed the
necessary radiological cleanup activities for one of the three parcels
of property and amended the Prometcor license to release this property.
Also, in January 1998, the NJDEP provided a "No Further Action" letter
for this portion of the property. It is now available to be sold without
any further environmental clearance needed.
The additional sampling and remediation required during
demolition and for soil contamination for the two remaining parcels of
the Newark property are continuing. The full extent of the costs is not
determinable until all testing and remediation have been completed and
accepted by the NJDEP and NRC.
Two of the Company's subsidiaries are subject to the New
Jersey Underground Storage Tank Law, N.J.S.A. 58:10A-21 et seq. and the
regulations promulgated thereunder, N.J.A.C. 7:14B-1.1 et seq.,
requiring upgrades to certain types of underground storage tanks. The
Company previously replaced its underground storage tanks at RCPC. 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. The extent of any
soil and groundwater contamination cannot be determined until testing
has been undertaken. Ronson Aviation is currently in negotiations with
the lessor, the County of Mercer ("Mercer"), as to the allocation of
responsibility between Ronson Aviation and Mercer for the costs of
meeting regulatory requirements as to the former tank system and for the
installation of the new storage tanks, because the former tanks are
owned by Mercer. In addition, most of the tanks pre-date the lease
between Mercer and Ronson Aviation. The negotiations with Mercer may
result in: 1) Mercer assuming responsibility for the new fueling
facility, closure and removal of the former tanks, and all soil and
groundwater remediation, if any, found to be required; 2) Ronson
Aviation being responsible for the construction of the new fueling
facility, Mercer assuming responsibility for the closure and removal of
the former tanks, and all or some of the soil and groundwater
remediation, with the cost incurred by Ronson Aviation to be deemed to
meet the requirements in the lease for three five-year extensions
through November 2022; or 3) some other allocation of responsibility for
the costs. The Company intends to vigorously pursue its rights under the
leasehold and under the statutory and regulatory requirements. Since the
ultimate allocation of 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, but management does not
believe that the effect will be material.
In the third quarter, 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
expended approximately $57,000 in 1998 and accrued about $78,000 in
future costs related to the release. 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 at
December 31, 1998.
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
that entity to also be 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. The USEPA Settlement Offer includes various options at costs
ranging from $307,000 to $376,000. In the fourth quarter of 1998, the
Company offered to settle all liabilities in the matter for payments
totalling $90,000 to be paid semiannually over three years. Because the
USEPA has determined that the volume of waste generated by the facility
and sent to the Site is "de minimis", because the USEPA has sent a
General Notice Letter to another PRP for the same waste and because the
Company has offered to settle the matter under the above mentioned
terms, the Company believes that the cost, if any, will not have a
material effect on the Company's financial position or results of
operations.
Other than the expenditures related to the replacement and
closure of underground storage tanks at Ronson Aviation, the Company
believes that compliance with environmental laws and regulations will
not have a material effect upon the Company's future capital
expenditures. Other than the cash requirements related to completing the
Prometcor environmental clearance and the fact that the full extent of
the Prometcor costs is not yet determinable, the Company believes that
compliance with environmental laws and regulations will not have a
material effect upon the Company's earnings or competitive position.
PATENTS AND TRADEMARKS
The Company maintains numerous patents and trademarks for
varying periods in the United States, Canada, Mexico and a limited
number of other countries. While both industry segments may benefit from
the Company's name as a registered trademark, the patents and trademarks
which are held principally benefit the consumer products segment of the
Company's business.
SEASONALITY AND METHODS OF COMPETITION
No material portion of the Company's business is seasonal. The
Company uses various methods of competition as appropriate in both of
its industry segments, such as price, service and product performance.
RESEARCH ACTIVITIES
The Company's consumer products segment expensed approximately
$164,000, $141,000 and $134,000 during the fiscal years ended December
31, 1998, 1997 and 1996, respectively, on research activities relating
to the development of new products and the improvement of existing
products, all of which were Company sponsored.
NUMBER OF EMPLOYEES
As of December 31, 1998, the Company and its subsidiaries
employed a total of 131 persons.
CUSTOMER DEPENDENCE
See above under "Consumer Products".
SALES AND REVENUES
The following table sets forth the percentage of total sales
contributed by each of the Company's classes of similar products which
contributed to total sales during the last three fiscal years.
Consumer Aviation Operations
Products and Services
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1998 68% 32%
1997 66% 34%
1996 65% 35%
(d) Financial information about foreign and domestic operations and
export sales.
Since 1981, the Company has not been engaged in significant
operations in foreign countries, although after December 31, 1982, it
recommenced sales of certain consumer products in Canada. In June 1985
Ronson-Canada was incorporated. This subsidiary is the principal
distributor of the Company's consumer products in Canada. The Company
has sold many of its trademarks outside of the USA, Canada and Mexico.
Item 2 - PROPERTIES
The following list sets forth the location and certain other
information concerning the Company's principal manufacturing and office
facilities. The Company's facilities are in relatively modern buildings
which were designed for their present purpose. The Company believes its
manufacturing and other facilities to be suitable for the operations
conducted. (See paragraphs (a) and (b) below.) In the list below,
"medium" facilities are those which have between 20,000 and 100,000
square feet; and "small" facilities are those which have less than
20,000 square feet.
(a) The facilities in Woodbridge, New Jersey, and Canada
comprise the consumer products segment. The Trenton, New Jersey,
facilities are used by the aviation services segment.
(b) All facilities are fully utilized by the Company, except
for the facility of Prometcor, Newark, New Jersey (see Item 1 (a)
above).
(1) Woodbridge, New Jersey
Facilities included in (a) and (b) below are owned subject to
first and second mortgages in favor of Summit Bank.
(a) One medium facility for manufacturing consumer products.
This facility is owned and is constructed of brick, steel and cinder
block.
(b) One small facility for storage. This facility is owned and
is constructed of metal, cinder block and cement.
(2) Newark, New Jersey
One small facility and two parcels of vacant land. Operations
of these facilities have terminated.
(3) Somerset, New Jersey
One small facility for executive and consumer products offices.
This facility is leased under a lease which expires in June 2001. The
facility is constructed of metal, cinder block and cement.
(4) Trenton, New Jersey
(a) One medium facility for fixed wing operations and services
and helicopter services, sales and office space leased to others. This
building is owned and is constructed of steel and concrete. The land on
which this building is located is leased under a leasehold with six
five-year terms automatically renewed, with the last five-year term
expiring in November 2007. The lease may be extended for five additional
five-year terms through November 2032, provided that during the
five-year term ending November 2007, Ronson Aviation invests $1,500,000
in capital improvements. The Company has proposed to the lessor, the
County of Mercer, that the 1998 and 1999 investment in fueling
facilities by Ronson Aviation be deemed to meet the requirements to
extend the lease term through November 2022.
(b) One medium facility - "T" hangars. These structures are
owned and are constructed of aluminum and concrete. The land upon which
these structures are located is leased under a leasehold on the same
terms as in 4 (a) above.
(5) Mississauga, Ontario, Canada
One small facility for sales and marketing, distribution center
and storage. This facility is subject to a lease which expires in March
2001. This facility is constructed of brick and cinder block.
Item 3 - LEGAL PROCEEDINGS
The Company is involved in various product liability claims.
The claimants have claimed unspecified damages. 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 these matters.
However, based on facts currently available, management believes that
damages awarded, if any, would be well within existing insurance
coverage.
See Item 1. "Business - Environmental Matters" above for
discussion of a pending environmental matter involving a Superfund Site
in California.
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
Not Applicable.
PART II
Item 5 - MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
a) The principal market for trading in Ronson common stock is
the Nasdaq SmallCap Market. Market data for the last two fiscal years
are listed below for information and analysis. The data presented
reflect inter-dealer prices, without retail markup, markdown or
commission and may not necessarily represent actual transactions.
1998
----------------------------------------------------
Quarter 1st 2nd 3rd 4th
----------------------------------------------------
High Bid 3 3/4 3 7/8 3 15/16 3 1/2
Low Bid 2 9/16 3 5/16 3 3/8 2 11/16
1997
----------------------------------------------------
Quarter 1st 2nd 3rd 4th
----------------------------------------------------
High Bid 2 5/8 2 1/2 3 1/4 4 1/8
Low Bid 2 1/4 1 13/16 2 2 1/4
At March 10, 1999, there were 2,772 stockholders of record of
the Company's common stock. Information required by this Item on the
frequency and amount of dividends is contained in Item 6 and is
incorporated herein by reference.
b) On November 15, 1996, the Company issued an offer to
exchange up to 1,423,912 aggregate shares of its common stock for all of
the 837,595 issued and outstanding shares of its 12% Cumulative
Convertible Preferred Stock. For each share of preferred stock
exchanged, the Company offered to issue 1.7 shares of common stock. The
terms and conditions of the offer were more fully described in the
Schedule 13E-4, the Offering Circular and the accompanying Letter of
Transmittal dated November 15, 1996 (together the "Exchange Offer").
These items were previously filed with the SEC and are incorporated
herein by reference. The Company's Exchange Offer expired on September
30, 1997. During the year ended December 31, 1997, the Company issued
1,361,435 shares of common stock under the Exchange Offer.
The Company received a total of 800,844 shares of preferred
stock tendered in exchange for the common shares. The preferred shares
received were retired and cancelled.
The issuance by the Company of shares of common stock in
exchange for shares of preferred stock in the Exchange Offer was in
reliance on the exemption from the registration requirements of the
Securities Act of 1933, as amended, provided by Section 3(a)(9) of the
1933 Act. That section provides an exemption from registration "for any
security exchanged by the issuer with its existing shareholders
exclusively where no commission or other remuneration is paid or given
directly or indirectly for soliciting such exchange". Since both the
preferred stock and the common stock involved in the Exchange Offer are
securities of the Company, and the Company exchanged one of its
securities for another of its securities exclusively with its existing
security holders without paying any commission or other remuneration for
soliciting the exchange, the Exchange Offer met all the requirements for
exemption as provided by Section 3(a)(9).
Item 6 - SELECTED FINANCIAL DATA
The information required by this Item is filed with this report
on page 31 and is incorporated herein by reference.
Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1998 Compared to 1997
Ronson Corporation's (the "Company's") Earnings from
Continuing Operations were $660,000 in 1998 compared to $783,000 in
1997. After the Loss from Discontinued Operations in 1998 of $949,000,
the Company's Net Loss in 1998 was $289,000, compared to Net Earnings in
1997 of $783,000. The $949,000 Loss from Discontinued Operations in 1998
of Prometcor, Inc. ("Prometcor"), Newark, New Jersey, related to
additional costs and expenses projected to complete compliance with
environmental requirements and the eventual sale of Prometcor's
properties.
Consolidated Net Sales were $23,173,000 in 1998 compared to
$23,170,000 in 1997. Net Sales of consumer products increased at Ronson
Consumer Products Corporation ("RCPC"), Woodbridge, New Jersey, and at
Ronson Corporation of Canada, Ltd. ("Ronson-Canada"), (together "Ronson
Consumer Products"), by 3% in 1998 compared to 1997, primarily as the
result of increased shipments of the Company's flame accessories. Net
Sales at Ronson Aviation, Inc. ("Ronson Aviation"), Trenton, New Jersey,
decreased by 5% in 1998 compared to 1997, primarily because increased
sales of general aviation services were more than offset by lower sales
of aircraft in 1998; however, Ronson Aviation's Earnings before
Interest, Other Items and Intercompany Charges increased by 80%, before
non-recurring costs, in 1998 from 1997.
Consolidated Cost of Sales, as a percentage of Consolidated
Net Sales, was reduced to 60% in 1998 from 63% in 1997. The Cost of
Sales percentage at Ronson Consumer Products was reduced to 51% in 1998
from 52% in 1997, primarily due to reductions in material costs related
to certain products. The Cost of Sales percentage at Ronson Aviation
decreased to 78% in 1998 from 83% in 1997, primarily due to increased
sales of general aviation services, particularly increased charter
services. The Cost of Sales at Ronson Aviation in 1998 included one-time
costs of about $135,000 related to a release, due to a mechanical
failure, of several hundred gallons of jet fuel. The Company has
notified its insurance carriers and expects a reimbursement of the
costs, but none of that potential insurance reimbursement has been
recorded as of December 31, 1998.
Consolidated General and Administrative Expenses, as a
percentage of Consolidated Net Sales, increased to 17% in 1998 from 15%
in 1997, primarily due to increased personnel costs, to legal and other
professional fees related to stockholder matters, and to costs of
development of new international markets associated with a new brand of
products.
Interest expense increased to $645,000 in 1998 from $523,000
in 1997, primarily due to increased long-term debt financing of Ronson
Aviation's fourth quarter 1997 purchase of the Citation II jet.
Other-Net increased to $185,000 in 1998 from $107,000 in
1997, primarily due to costs accrued in the amount of $110,000 related
to the Company's offer to settle the California Superfund Site matter
discussed more fully below.
The Company's Earnings from Continuing Operations before
Income Taxes were $520,000 in 1998 compared to $549,000 in 1997. The
1998 Earnings from Continuing Operations before Income Taxes of $520,000
were net of non-recurring costs of $245,000, consisting of $135,000
related to the jet fuel release and $110,000 related to the California
Superfund Site matter. Improved operating earnings in 1998 of 9% at
Ronson Consumer Products and of 104%, before non-recurring costs, at
Ronson Aviation were offset by the increased corporate General and
Administrative Expenses and the non-recurring costs.
The Loss from Discontinued Operations included the costs
recorded by the Company related to the discontinuance of Prometcor, as
follows (in thousands):
Year Ended December 31,
1998 1997 1996
------- ------- -------
Discontinuance costs accrued $ 1,506 $ -- $ 1,370
Deferred income tax benefit (557) -- (180)
------- ------- -------
Loss from Discontinued Operations $ 949 $ -- $ 1,190
======= ======= =======
In December 1989 the Company adopted a plan to discontinue
the operations of its wholly owned subsidiary, Ronson Metals
Corporation, subsequently renamed Prometcor. Upon the cessation of
operations, Prometcor began its compliance with the environmental
requirements of the New Jersey Environmental Cleanup Responsibility Act
("ECRA"), now known as the Industrial Site Recovery Act ("ISRA"),
administered by the New Jersey Department of Environmental Protection
("NJDEP") and other applicable State laws with the objective of selling
the land and existing buildings previously used in the discontinued
operations. The discontinuance of operations also required the
termination of a United States Nuclear Regulatory Commission ("NRC")
license obtained in 1984 for the storage and use on site of a
radioactive element to be used in a new product, the sales of which were
minimal.
To comply with the New Jersey state environmental laws, the
Company has utilized the services of independent environmental
consultants to undertake studies and extensive field tests and to
develop appropriate cleanup plans. The plans as originally adopted have
since been amended on many occasions to address various substances
uncovered by additional tests required from time to time by NJDEP. In
addition, radiological consultants have been engaged to conduct tests
and sampling to develop and implement a Decommissioning Plan to
terminate the NRC license held by Prometcor.
In assessing the results of recent additional tests for
radiological and non-radiological materials required by the NJDEP and
NRC in the second half of 1998, the Company has concluded that the final
release of the Prometcor properties for eventual sale by the Company can
be most economically obtained by the demolition of the Prometcor
buildings and the removal from the site of the resulting debris, in lieu
of the alternative of a prolonged period of continuing costly testing
and more extensive cleanup of every part of the affected buildings.
Accordingly, further testing and cleanup were undertaken and completed
in January 1999 to support the Company's request to the NRC for approval
of the proposed demolition. In February 1999 the NRC amended Prometcor's
license to permit the demolition of the major building on the property,
and the Company expects the NRC amendment for the demolition of the
remaining building to be received in the next 30 days. All buildings are
expected to be demolished by April 30, 1999.
Separately, Prometcor's plan for final radiological cleanup
of the soils was approved by the NRC in November 1998 and the NJDEP in
February 1999. In addition, the plan relating to non-radiological
cleanup and clearance of the soil has been approved by the NJDEP and
will be implemented following the demolition of the buildings. The
Company's plan to resolve groundwater issues has not yet been approved
by the NJDEP. Completion of the actions to be taken under the cleanup
plans, including the removal of affected debris and soil as may be
required, is expected to be completed later this year. At that time, the
properties will be available for sale.
The total costs and expenses related to the termination of
Prometcor's business operations in 1990, less the expected gain from the
eventual sale of Prometcor's assets, have been estimated, based on the
latest available information, to be about $5,770,000. These estimated
costs and expenses consist of: Prometcor's expenses for the completion
of compliance with the NJDEP and NRC environmental regulations; the
termination of Prometcor's business operations; environmental consulting
costs, legal and other professional fees; and costs for the maintenance
of the Prometcor property, including insurance and taxes. These costs
and expenses, net of deferred income tax benefits, have been charged
against the Company's Loss from Discontinued Operations and Net Earnings
(Loss) between the beginning of 1990 and year end 1998. The liability
for these estimated costs and expenses as recorded in the financial
statements at December 31, 1998, was based, in accordance with normal
accounting practices, on the lower limit of the range of costs as
projected by the Company. The estimated upper limit of the range of
costs is approximately $1,000,000 above the lower limit.
The additional costs accrued in December 1998, as discussed
above, were primarily due to (in thousands):
NRC and NJDEP environmental clearance of
the buildings for demolition and
their demolition $ 857
Additional time required to obtain final
clearance from the NRC and NJDEP 287
Long-term groundwater monitoring (present
value) 172
Estimated NRC and NJDEP charges, the
majority of which were received by the
Company in January 1999 138
Other 52
------
$1,506
======
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.
1997 Compared to 1996
The Company's Earnings from Continuing Operations increased
to $783,000 in 1997 from $335,000 in 1996, an increase of $448,000, or
134%. After the Loss from Discontinued Operations in 1996 of $1,190,000,
the Company's Net Loss in 1996 was $855,000, compared to Net Earnings in
1997 of $783,000. The 1996 $1,190,000 Loss from Discontinued Operations
of Prometcor related to additional costs and expenses projected to
complete compliance with environmental requirements and the eventual
sale of Prometcor's properties.
Consolidated Net Sales were $23,170,000 in 1997 compared to
$25,454,000 in 1996. Net Sales of consumer products decreased at Ronson
Consumer Products by 7% in 1997 compared to 1996, primarily as the
result of reduced shipments of the Varaflame Ignitor. Net Sales at
Ronson Aviation decreased by 12% in 1997 compared to 1996, primarily
because increased sales of general aviation services were more than
offset by lower sales of aircraft in 1997.
Consolidated Cost of Sales, as a percentage of Consolidated
Net Sales, was lower at 63% in 1997 compared to 65% in 1996. The Cost of
Sales percentage at Ronson Consumer Products was unchanged at 52% in
1997 and 1996. The Cost of Sales percentage at Ronson Aviation was
reduced to 83% in 1997 from 88% in 1996. The Cost of Sales percentage
decrease at Ronson Aviation in 1997 was due to cost reductions and to
increased sales of general aviation services.
Consolidated Selling, Shipping and Advertising Expenses, as
a percentage of Consolidated Net Sales, increased to 16% in 1997 from
14% in 1996. The increase was due primarily to the lower Consolidated
Net Sales in 1997 as compared to 1996.
Consolidated General and Administrative Expenses, as a
percentage of Consolidated Net Sales, increased to 15% in 1997 from 13%
in 1996, primarily due to the decrease in Consolidated Net Sales in 1997
and to increased personnel-related costs and professional fee expenses.
Interest Expense decreased to $523,000 in 1997 from $762,000
in 1996. This decrease was primarily due to reduced short-term debt at
Ronson Aviation utilized to finance lower aircraft inventory.
Other-Net in 1996 included a non-recurring charge of
$434,000 at Ronson Aviation in the third quarter of 1996 which resulted
from a revaluation of certain aircraft inventory and costs of
restructuring Ronson Aviation's operations.
The Loss from Discontinued Operations in the year ended
December 31, 1996, included the costs recorded by the Company related to
the discontinuance of Prometcor, as follows (in thousands):
Discontinuance costs accrued $ 1,370
Deferred income tax benefit (180)
-------
Loss from Discontinued Operations $ 1,190
=======
In December 1989 the Company adopted a plan to discontinue
the operations in 1990 of one of its New Jersey facilities, Prometcor,
and to comply with ISRA and all other applicable laws. As part of the
plan to sell the properties of Prometcor's discontinued operations,
Prometcor has also been involved in the termination of its United States
NRC license. The total costs and expenses related to terminating the
Prometcor operations, less the expected gain from the eventual sales of
Prometcor's assets, have been projected to be approximately $4,260,000.
These costs and expenses consisted of: termination of Prometcor's
operations; maintenance of the Prometcor property; and completion of
compliance by Prometcor with environmental regulations. In the fourth
quarter of 1996, the amount of $1,370,000 was charged against the
Company's Loss from Discontinued Operations, prior to deferred income
tax benefits. The charges between the beginning of 1990 and year end
1996 were due primarily to: costs incurred; previously projected costs
related to compliance with the NJDEP requirements; NRC related
activities; and the extended period of time previously projected for
NJDEP and NRC clearance. The liability for these costs and expenses
recorded in the financial statements at December 31, 1997, was
considered adequate by the Company, based upon: the results of testing
completed; NJDEP and NRC comments; reports to the Company by its
environmental counsel and environmental consultants.
INCOME TAXES
In accordance with Statement of Financial Accounting
Standards ("SFAS") #109, "Accounting for Income Taxes", in 1998, 1997
and 1996, the Company recognized deferred income tax benefits of
$727,000, $225,000 and $390,000, respectively, as the result of
reductions in the valuation allowance related to the Company's deferred
income tax assets and to accruals of costs related to discontinued
operations in 1998 and 1996. Current income taxes in the year ended
December 31, 1998, of $108,000 were presented net of credits arising
from the utilization of available tax losses and loss carryforwards in
accordance with SFAS #109. In 1998, 1997 and 1996, current income tax
benefits (expenses) were composed of state income tax benefits
(expenses) of $(30,000), $141,000, and $(81,000), respectively. At
December 31, 1998, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $7,293,000, investment tax
credit carryforwards of $43,000 and alternative minimum tax credit
carryforwards of $60,000. (Refer to Note 3 of the Notes to Consolidated
Financial Statements.)
IMPACT OF INFLATION
The Company recognizes that inflation can adversely affect
the operating performance of a company. Therefore, in formulating
operating and pricing policy, the Company carefully considers changing
price levels. The Company believes that it has been able to pass along
cost increases as they relate to the production of goods and services.
FINANCIAL CONDITION
The Company's Stockholders' Equity increased to $2,145,000
at December 31, 1998, from $1,864,000 at December 31, 1997. The increase
of $281,000 in 1998 in the Company's Stockholders' Equity was due
primarily to a net gain on pension plans of $393,000 and amortization of
the Unrecognized Net Loss on Pension Plans of $162,000, partially offset
by the Net Loss of $289,000. The Company had a deficiency in working
capital at December 31, 1998, of $2,208,000 as compared to $1,605,000 at
December 31, 1997. The 1998 decline in working capital of $603,000 was
primarily due to the accrual of $1,506,000 in costs related to
discontinued operations in 1998, partially offset by Earnings from
Continuing Operations of $660,000.
Cash increased in 1998 from changes in inventories primarily
due to reduced inventories at Ronson Consumer Products. Cash increased
in 1997 from changes in inventories primarily due to sales by Ronson
Aviation of aircraft transferred from fixed assets into inventories. The
Company's inventories were reduced by $1,412,000 in the year ended
December 31, 1996, primarily due to a reduction in aircraft inventory at
Ronson Aviation. Short-term debt was reduced by $1,112,000 in 1996
primarily as the result of repayment of aircraft-related loans upon the
sales of the aircraft.
Cash increased from changes in accounts payable in 1998
primarily due to differences in timing of purchases in 1998 from 1997.
The Company's current liabilities of discontinued operations
increased by approximately $727,000 in 1998 primarily as the result of
the 1998 accrual of additional costs and expenses of $1,506,000
projected to complete compliance by Prometcor with environmental
requirements. The Company's current liabilities of discontinued
operations declined by $647,000 in 1997, primarily due to the
expenditures incurred in the year related to Prometcor's environmental
compliance.
Capital expenditures decreased to $845,000 in 1998 from
$2,138,000 in 1997 primarily due to the fourth quarter 1997 Ronson
Aviation purchase of a Citation II jet for use in its charter
operations. The acquisition of the aircraft was financed by long-term
debt from Summit Bank ("Summit"). (Refer to Note 5 of the Notes to
Consolidated Financial Statements.)
Based on the amount of the loans outstanding and the levels
of accounts receivable and inventory at December 31, 1998, Ronson
Consumer Products had unused borrowings available at December 31, 1998,
of about $225,000 under the Summit and Canadian Imperial Bank of
Commerce lines of credit. Ronson Aviation had no outstanding loans under
the Summit Revolving Loan. Based on the level of accounts receivable,
Ronson Aviation had unused borrowings of about $294,000 under the Summit
line of credit at December 31, 1998.
In September 1998 Ronson Aviation entered into a long-term
loan agreement with its primary fuel supplier. The loan agreement
provided $250,000 to Ronson Aviation to be used to construct the new
fueling facility. The loan is due in 120 monthly installments of $2,775
including interest at the rate of 6% per annum. The total cost of the
new fueling facility is expected to be about $430,000, approximately
$115,000 of which was yet to be incurred at December 31, 1998.
In October 1998 Ronson Aviation and Summit, the Company's
principal lender, agreed to extend Ronson Aviation's Term Loan to June
30, 2000. All other terms of the agreement were substantially unchanged.
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
that entity to also be 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 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. As of December 31, 1998,
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
presence or extent of any soil and groundwater contamination cannot be
determined until testing has been undertaken. Ronson Aviation is
currently in negotiations with the lessor, the County of Mercer
("Mercer"), as to the allocation of responsibility between Ronson
Aviation and Mercer for the costs of meeting regulatory requirements as
to the former tank system and for the installation of the new storage
tanks, because the former tanks are owned by Mercer. In addition, most
of the tanks pre-date the lease between Ronson Aviation and Mercer. The
negotiations with Mercer may result in: 1) Mercer assuming
responsibility for the new fueling facility, closure and removal of the
former tanks, and all soil and groundwater remediation, if any, found to
be required; 2) Ronson Aviation being responsible for the construction
of the new fueling facility, Mercer assuming responsibility for the
closure and removal of the former tanks, and all or some of the soil and
groundwater remediation, with the cost incurred by Ronson Aviation to be
deemed to meet the requirements in the lease for three five-year
extensions through November 2022; or 3) some other allocation of
responsibility for the costs. The Company intends to vigorously pursue
its rights under the leasehold and under the statutory and regulatory
requirements. Since the ultimate allocation of 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, but management
does not believe that the effect will be material.
At December 31, 1998, the Company did not have significant
other capital commitments. The Company has operating leases, the most
significant of which relates to office space used by the Company and
RCPC. The Company's total commitments under capital and operating leases
are presented in Note 6 of the Notes to Consolidated Financial
Statements.
At December 31, 1998, net assets of consolidated
subsidiaries, excluding intercompany accounts, amounted to approximately
$2,520,000, substantially all of which is restricted by loan covenants
as to transfer to the parent. (Refer to Note 5 of the Notes to
Consolidated 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.
The implementation of these upgraded systems has begun and is expected
to be completed and tested in the second quarter of 1999.
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.
Item 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements required by this item are included in
Item 14.
Item 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no disagreements with accountants in the years ended
December 31, 1998, 1997 and 1996.
PART III
Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
(a) Identification of directors.
The following table indicates certain information
about the Company's seven (7) directors:
Positions and Offices
with Company
Presently Held (other
than that of Director);
Period Business Experience
Served Term as During Past Five Years
as Director (with Company unless
Name of Director Age Director Expires otherwise noted)
---------------- --- -------- ------- ----------------------
Louis V. Aronson II 76 1952- 1999 President & Chief
Present Executive Officer;
Chairman of Executive
Committee; Member of
Nominating Committee.
Robert A. Aronson 49 1993- 2001 Member of Audit
Present Committee; Managing
Member of Independence
Leather, L.L.C.,
Mountainside, NJ, the
principal business of
which is the import of
leather products, May
1996 to present;
Senior Vice
President/Chief
Financial Officer of
Dreher, Inc., Newark,
NJ, the principal
business of which was
the manufacture and
import of leather
products, October 1987
to May 1996; son of
the President & Chief
Executive Officer of
the Company.
Positions and Offices
with Company
Presently Held (other
than that of Director);
Period Business Experience
Served Term as During Past Five Years
as Director (with Company unless
Name of Director Age Director Expires otherwise noted)
---------------- --- -------- ------- ----------------------
Albert G. Besser (1) 74 Sept. 1999 Founder, former
1998- Director and of
Present counsel for Hannoch
Weisman, Attorneys at
Law, Roseland, NJ,
1957 to present;
Editor, New Jersey Law
Journal, 1970 to
present; Arbitrator
for NASD, 1993 to
present.
Erwin M. Ganz 69 1976- 2001 Chairman of Audit
Present Committee; Member of
Executive Committee
and Nominating
Committee; Consultant
for the Company, 1994
to present; Executive
Vice President-
Industrial Operations,
1975 to 1993; Chief
Financial Officer,
1987 to 1993.
Gerard J. Quinnan 70 1996- 2000 Consultant for the
Present Company, 1990 to
present; Vice
President-General
Manager of Ronson
Consumer Products
Corporation, 1981 to
1990.
Positions and Offices
with Company
Presently Held (other
than that of Director);
Period Business Experience
Served Term as During Past Five Years
as Director (with Company unless
Name of Director Age Director Expires otherwise noted)
---------------- --- -------- ------- ----------------------
Justin P. Walder 63 1972- 2001 Secretary; Assistant
Present Corporation Counsel;
Member of Executive
Committee and
Nominating Committee;
Principal in Walder,
Sondak & Brogan, P.A.,
Attorneys at Law,
Roseland, NJ.
Saul H. Weisman 73 1978- 2000 Member of Executive
Present Committee and Audit
Committee; Retired
President, Jarett
Industries, Inc.,
Cedar Knolls, NJ, the
principal business of
which is the sale of
hydraulic and
pneumatic equipment to
industry, 1955 to
1997.
(1) Mr. Besser was appointed on September 15, 1998, to the Class II director
position vacated due to the August 1998 resignation of Mr. Barton P. Ferris,
Jr.
No director also serves as a director of another company
registered under the Securities Exchange Act of 1934.
(b) Identification of executive officers.
The following table sets forth certain information
concerning the executive officers of the Company, each of whom is serving a
one-year term of office, except Mr. Louis V. Aronson II, who is a party to an
employment contract with the Company which expires on December 31, 2002:
Positions and Offices
Period Served with Company;
Name Age as Officer Family Relationships
- ------------------- --- ---------- ------------------------
Louis V. Aronson II 76 1953- President & Chief Executive
Present Officer; Chairman of
Executive Committee; Director.
Daryl K. Holcomb 48 1996- Vice President;
Present
1993- Chief Financial Officer;
Present
1988- Controller and Treasurer; None.
Present
Justin P. Walder 63 1989- Secretary;
Present
1972- Assistant Corporation Counsel;
Present Director; None.
Messrs. L.V. Aronson and Holcomb have been employed by
the Company in executive and/or professional capacities for at least
the five-year period immediately preceding the date hereof.
Mr. Walder has been Assistant Corporation Counsel and a director of
the Company and a principal in Walder, Sondak & Brogan, P.A.,
Attorneys at Law, for at least the five-year period immediately
preceding the date hereof.
(c) Section 16(a) Beneficial Ownership Reporting Compliance
Under Securities and Exchange Commission ("SEC") rules, the
Company is required to review copies of beneficial ownership reports filed with
the Company which are required under Section 16(a) of the Exchange Act by
officers, directors and greater than 10% beneficial owners. Based solely on the
Company's review of forms filed with the Company, the Company believes no
information is required to be reported under this item.
Item 11 - EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The Summary Compensation Table presents compensation
information for the years ended December 31, 1998, 1997 and 1996, for
the Chief Executive Officer and the other executive officer of the
Company whose combined base salary and bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
Long-Term
Compensa- All
Annual Compensation tion Other
Name and ------------------- --------- Compen-
Principal Salary Bonus Options/ sation
Position Year ($) ($)(1) SARS (#) ($)(2)
-------- ---- ------------------- --------- ------
Louis V. Aronson II 1998 $494,773 $51,535 -- $11,204
President & Chief 1997 462,405 39,597 -- 10,446
Executive Officer 1996 432,154 53,229 22,500 10,024
Daryl K. Holcomb 1998 127,500 17,929 -- 2,805
Vice President & 1997 119,062 12,724 -- 2,701
Chief Financial 1996 111,687 15,969 10,000 2,500
Officer, Controller
& Treasurer
Footnotes
(1) The compensation included in the bonus column is an incentive
payment resulting from the attainment by the Company's operating
subsidiaries of certain levels of net sales and profits before
taxes.
(2) In 1998 All Other Compensation included matching credits by the
Company under its Employees' Savings Plan (Mr. L.V. Aronson, $3,200
and Mr. Holcomb, $2,805); and the cost of term life insurance
included in split-dollar life insurance policies (Mr. L.V. Aronson,
$8,004).
OPTION GRANTS IN LAST FISCAL YEAR
None.
AGGREGATED OPTION EXERCISES AND YEAR END OPTION VALUES
The following table summarizes, for each of the named
executive officers, options exercised during the year and the number of
stock options unexercised at December 31, 1998. All options held by the
named executives were exercisable at December 31, 1998. "In-the-money"
options are those where the fair market value of the underlying
securities exceeds the exercise price of the options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES
Value of
Shares Number of In-the-Money
Acquired Unexercised Options Options at
on Value (1) at FY-End (2) FY-End (3)
Name Exercise Realized Exercisable Exercisable
---- -------- -------- ----------- -----------
Louis V. Aronson II -- $ -- 22,500 $ --
Daryl K. Holcomb 7,000 14,350 15,500 10,750
Footnotes
(1) The value realized equals the market value of the common stock
acquired on the date of exercise minus the exercise price.
(2) The options held by the named executive officers at December 31,
1998, are exercisable at any time and expire on May 22, 2000, and
June 26, 2001.
(3) The value of the unexercised options was determined by comparing the
average of the bid and ask prices of the Company's common stock at
December 31, 1998, to the option prices. Options to purchase 15,500
shares held by Mr. Holcomb were in-the-money at December 31, 1998.
LONG-TERM INCENTIVE PLANS
None.
PENSION PLAN
No named executive is a participant in a defined benefit
pension plan of the Company.
COMPENSATION OF DIRECTORS
Directors who are not officers of the Company receive an
annual fee of $8,500 and, in addition, are compensated at the rate of
$650 for each meeting of the Company's Board of Directors actually
attended and $400 for each meeting of a Committee of the Company's Board
of Directors actually attended. Officers receive no compensation for
their services on the Board or on any Committee.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
Mr. L.V. Aronson II is a party to an employment contract
with the Company dated September 21, 1978, which, as amended on July 24,
1980, July 1, 1982, October 11, 1985, July 7, 1988, May 10, 1989, August
22, 1991, May 22, 1995, June 11, 1997, and December 17, 1998, provides
for a term expiring December 31, 2002. The employment contract provides
for the payment of a base salary which is to be increased 7% as of
January 1 of each year. It also provides that the Company shall
reimburse Mr. L.V. Aronson for expenses, provide him with an automobile,
and pay a death benefit equal to two years' salary. During 1990 Mr. L.V.
Aronson offered and accepted a 5% reduction in his base salary provided
for by the terms of his employment contract, and, in addition, a 7%
salary increase due January 1, 1991, under the terms of the contract was
waived. During 1992 also, Mr. L.V. Aronson offered and accepted a 7%
reduction in his base salary. Effective September 1, 1993, Mr. L.V.
Aronson offered and accepted a further 5% reduction in his base salary.
Under the employment contract, Mr. L.V. Aronson's full compensation will
continue in the event of Mr. L.V. Aronson's disability for the duration
of the agreement or one full year, whichever is later. The employment
contract also provides that if, following a Change in Control (as
defined in the employment contract), Mr. L.V. Aronson's employment with
the Company terminated under prescribed circumstances as set forth in
the employment contract, the Company will pay Mr. L.V. Aronson a lump
sum equal to the base salary (including the required increases in base
salary) for the remaining term of the employment contract.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of the Company, as a whole, provides overall
guidance of the Company's executive compensation program. All members of
the Board participate in the review and approval of each of the
components of the Company's executive compensation program described
below, except that no director who is also a Company employee
participates in the review and approval of his compensation. Directors
of the Company who are also current employees of the Company are Messrs.
L.V. Aronson and Walder. Directors of the Company who are also former
employees of the Company are Messrs. R.A. Aronson, whose employment with
the Company ceased in 1987, Ganz, who retired from the Company in 1993,
and Quinnan, who retired from Ronson Consumer Products in 1990. Mr. Ganz
has a consulting agreement with the Company for the period ending
December 31, 2000, which is cancellable at any time by either party with
180 days notice and, effective January 1, 1999, provides compensation at
the annual rate of $83,000 for the years ending December 31, 1999 and
2000, plus participation in the Company's health and life insurance
plans and the use of an automobile. Mr. Ganz's compensation under the
agreement was $77,500 for the year ended December 31, 1998. Mr. Quinnan
has a consulting agreement with the Company for the period ending
December 31, 1999, which is cancellable at any time by either party with
60 days notice. The agreement provides that Mr. Quinnan perform
consulting services for the Company, Ronson Consumer Products, and
Prometcor at a specified daily rate. In 1998 Mr. Quinnan was compensated
$22,024 for his services and was provided the use of an automobile.
(a) Transactions with management and others.
During the year ended December 31, 1998, the Company and
Ronson Consumer Products were provided printing services by Michael
Graphics, Inc., a New Jersey corporation, amounting to $80,781. A
greater than 10% shareholder of Michael Graphics is the son-in-law of
the Company's President.
In October 1998 the Company entered into a consulting
agreement with Mr. Carl W. Dinger III, a 5% shareholder of the Company.
The agreement provides that Mr. Dinger will perform certain consulting
services for the Company for a period of 18 months at a fee of $4,500
per month. During the year ended December 31, 1998, Mr. Dinger was
compensated $13,500 under the agreement.
In October 1998 Mr. Dinger granted an option to the Company
to purchase the 186,666 shares of the Company's common stock held by Mr.
Dinger. The option is for a period of 18 months, and the exercise price
of the option is $5.25 per share. The cost of the option is $5,500 per
month for the period of the option or until exercised. The Company
incurred a cost of $16,500 during the year ended December 31, 1998. As
part of the option agreement, Mr. Dinger has granted the Board of
Directors of the Company an irrevocable proxy to vote the optioned
shares during the term of the option.
(b) Certain business relationships.
During the year ended December 31, 1998, the Company, RCPC,
Ronson Aviation and Prometcor retained the firm of Walder, Sondak &
Brogan, P.A., Attorneys at Law, to perform legal services. Justin P.
Walder, a principal in that firm, is a director and officer of the
Company.
Item 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security ownership of certain beneficial owners.
Set forth below are the persons who, to the best of
management's knowledge, own beneficially more than five percent of any
class of the Company's voting securities, together with the number of
shares so owned and the percentage which such number constitutes of the
total number of shares of such class presently outstanding:
Name and Address
of Beneficial Title of Beneficially Percent of
Owner Class Owned Class
---------------- -------- ------------ ----------
Louis V. Aronson II Common 786,849 (1)(2) 24.4% (1)(2)
Campus Drive
P.O. Box 6707
Somerset, New Jersey 08875
Ronson Corporation Retirement
Plan Common 171,300 (2) 5.4% (2)
Campus Drive
P.O. Box 6707
Somerset, New Jersey 08875
Patrick Kintz Common 232,200 (3) 7.3% (3)
8323 Misty Vale
Houston, Texas 77075
Carl W. Dinger III Common 184,666 (4) 5.8% (4)
7 Lake Trail West
Morristown, New Jersey 07960
Steel Partners II, L.P. Common 316,199 (5) 9.9% (5)
750 Lexington Avenue
27th Floor
New York, New York 10022
(1) Includes 22,500 shares of unissued common stock issuable to Mr. L.V.
Aronson upon exercise of stock options held by Mr. L.V. Aronson
under the Ronson Corporation 1996 Incentive Stock Option Plan.
(2) The Ronson Corporation Retirement Plan ("Retirement Plan") is the
beneficial owner of 171,300 common shares. The shares held by the
Retirement Plan are voted by the Retirement Plan's trustees, Messrs.
L.V. Aronson, Ganz and Gedinsky. If the shares held by the
Retirement Plan were included in Mr. L.V. Aronson's beneficial
ownership, Mr. L.V. Aronson's beneficial ownership would be 958,149
shares, or 29.8% of the class. If the shares held by the Retirement
Plan were included in Mr. Ganz's beneficial ownership, Mr. Ganz's
beneficial ownership would be 200,442 shares, or 6.3% of the class.
If the shares held by the Retirement Plan were included in Mr.
Gedinsky's beneficial ownership, Mr. Gedinsky's beneficial ownership
would be 171,300 shares or 5.4% of the class. The Retirement Plan's
holdings were reported in 1988 on Schedule 13G, as amended September
22, 1997.
(3) 232,200 common shares owned directly. This information was provided
to the Company by Mr. Kintz.
(4) 184,666 common shares owned directly. This information was provided
to the Company by Mr. Dinger. Mr. Dinger has provided the Company's
Board of Directors with an irrevocable proxy to vote these shares
(refer to "Transactions with Management and Others" in Item 11
above).
(5) 316,199 common shares owned by Steel Partners II, L.P., Steel
Partners, L.L.C., the general partner of Steel Partners II, L.P.,
and Mr. Warren G. Lichtenstein, the sole executive officer and
managing member of Steel Partners, L.L.C., are also beneficial
owners of the shares. This information was obtained from a Schedule
13D filed with the SEC by Steel Partners II, L.P., and Mr.
Lichtenstein.
(b) Security Ownership of Management
The following table shows the number of shares of common
stock beneficially owned by each director, each named executive officer,
and by all directors and officers as a group and the percentage of the
total shares of common stock outstanding owned by each individual and by
the group shown in the table. Individuals have sole voting and
investment power over the stock shown unless otherwise indicated in the
footnotes:
Name of Individual or Amount and Nature of Percent of
Identity of Group Beneficial Ownership(2) Class
--------------------- ---------------------- ----------
Louis V. Aronson II 786,849 (3) 24.4%
Robert A. Aronson 6,995 (1)
Albert G. Besser 700 (1)
Erwin M. Ganz 29,142 (3) (1)
Gerard J. Quinnan 3,500 (1)
Justin P. Walder 47,503 1.5%
Saul H. Weisman 15,343 (1)
Daryl K. Holcomb 33,270 1.0%
All Directors and
Officers as a group
(nine (9) individuals
including those named above) 927,502 28.6%
(1) Shares owned beneficially are less than 1% of total shares
outstanding.
(2) Shares listed as owned beneficially include 46,500 shares subject to
option under the Ronson Corporation 1987 and 1996 Incentive Stock
Option Plans as follows:
Common Shares
Under Option
-------------
Louis V. Aronson II 22,500
Justin P. Walder 5,000
Daryl K. Holcomb 15,500
All Directors and Officers
as a group (nine (9)
individuals including
those named above) 46,500
(3) Does not include 171,300 shares of issued common stock owned by the
Retirement Plan. The shares held by the Retirement Plan are voted by
the Plan's trustees, Messrs. L.V. Aronson, Ganz and Gedinsky. If the
shares held by the Retirement Plan were included in Mr. L.V.
Aronson's beneficial ownership, Mr. L.V. Aronson's beneficial
ownership would be 958,149 shares, or 29.8% of the class. If the
shares held by the Retirement Plan were included in Mr. Ganz's
beneficial ownership, Mr. Ganz's beneficial ownership would be
200,442 shares, or 6.3% of the class.
(c) Changes in control.
The Company knows of no contractual arrangements which may
operate at a subsequent date to result in a change in control of the
Company.
Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Refer to Compensation Committee Interlocks and Insider
Participation in Item 11 - Executive Compensation above for information
in response to (a) and (b) of this Item.
(c) Indebtedness of management.
None.
(d) Transactions with promoters.
Not applicable.
PART IV
Item 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) (1) and (2) - The response to this portion of Item 14 is submitted
as a separate section of this report.
(3) Listing of exhibits, as applicable.
(3) Articles of incorporation are incorporated herein by
reference. The By-Laws of the Company were amended on March 5, 1997, to
include a new Section 9 of Article I, Nomination for Board of Directors.
The amended By-Laws were filed as Exhibit 3 with the 1996 Form 10-K and
are incorporated herein by reference.
Reference is made to Company's Form S-2 filed on
September 18, 1987, and incorporated herein by reference.
Reference is made to Company's Form S-2 filed on April
8, 1988, and incorporated herein by reference.
(10) Material contracts.
On January 6, 1995, RCPC entered into an agreement with
Summit for a Revolving Loan and a Term Loan. On March 6, 1997, the
Revolving Loan was amended and extended to June 30, 2000. On July 8,
1997, the Revolving Loan was further amended to provide $400,000 in
additional loan availability. The 1995 agreements were attached to the
Company's 1994 Form 10-K as Exhibits 10(a)-10(f). The March 1997
amendments to the Revolving Loan were attached to the Company's 1996
Form 10-K as Exhibits 10(a)-10(c). The July 1997 amendment was attached
to the Company's September 30, 1997, Form 10-Q as Exhibit 10(g).
On December 1, 1995, the Company and RCPC entered into a
mortgage loan agreement with Summit. The agreements were attached to the
Company's 1995 Form 10-K as Exhibits 10(a) and 10(b).
On August 28, 1997, Ronson Aviation entered into an
agreement with Summit for a Revolving Loan and a Term Loan. The
Revolving Loan and Term Loan agreements were attached to the Company's
September 30, 1997, Form 10-Q as Exhibits 10(a)-10(f).
For further information on Company's loan agreements,
reference is made to Notes 4 and 5 of the Notes to Consolidated
Financial Statements contained in the Company's financial statements for
the year ended December 31, 1998, filed with this report pursuant to
Item 8, which is incorporated herein by reference.
The Company is a party to an employment contract with
Mr. Louis V. Aronson II dated December 21, 1978, as amended July 24,
1980, July 1, 1982, October 11, 1985, July 7, 1988, May 10, 1989, August
22, 1991, May 22, 1995, June 11, 1997, and December 17, 1998. This
contract is incorporated herein by reference as filed as Exhibit 10.16
to Registration Statement No. 33-13696 on Form S-2 dated September 18,
1987. The amendment dated December 17, 1998, is attached hereto as
Exhibit 10(a).
(a) The Summary of the Management Incentive Plan of the Company
and its subsidiaries is attached as Exhibit 10(b).
(20) Other documents or statements to security holders.
The Ronson Corporation Notice of Meeting of Stockholders
held on October 27, 1998, and Proxy Statement was filed on September 29,
1998, and is incorporated herein by reference.
On November 15, 1996, the Company issued an offer to
exchange up to 1,423,912 aggregate shares of its common stock for all of
the 837,595 issued and outstanding shares of its 12% Cumulative
Convertible Preferred Stock. For each share of preferred stock
exchanged, the Company offered to issue 1.7 shares of common stock. The
terms and conditions of the offer are more fully described in the
Offering Circular and the accompanying Letter of Transmittal filed on
November 15, 1996, which are incorporated herein by reference. The
Exchange Offer terminated September 30, 1997.
(21) Subsidiaries of the Company.
The Company is the owner of 100% of the voting power of
the following subsidiaries, each of which is included in the
consolidated financial statements of the Company:
Wholly Owned Subsidiary State or Other Jurisdiction
and Business Name of Incorporation or Organization
----------------------- --------------------------------
Domestic
Ronson Consumer Products Corporation New Jersey
Ronson Aviation, Inc. New Jersey
Prometcor, Inc. (formerly known as New Jersey
Ronson Metals Corporation)
Foreign
Ronson Corporation of Canada, Ltd. Canada
The Company also holds 100% of the voting power of three
additional subsidiaries which are included in its consolidated financial
statements and which, if considered in the aggregate as a single
subsidiary, would not constitute a significant subsidiary.
(23) Consent of experts and counsel attached hereto as
Exhibit 23(a).
(99) Additional exhibits.
None.
(b) Reports on Form 8-K filed in the fourth quarter of 1998.
On October 30, 1998, and on November 13, 1998, the
Company filed reports on Form 8-K with the Securities and Exchange
Commission providing information in response to Item 5 of such reports.
No financial statements or pro forma financial information was included
in these reports.
(c) Exhibits - The response to this portion of Item 14 is submitted as a
separate section of this report. (See Item (a) (3).)
(d) Financial Statement Schedules - The response to this portion of Item
14 is submitted as a separate section of this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Company has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
RONSON CORPORATION
Dated: March 29, 1999 By: /s/Louis V. Aronson II
------------------------------------
Louis V. Aronson II, President and
Chief Executive Officer and Director
Dated: March 29, 1999 By: /s/Daryl K. Holcomb
------------------------------------
Daryl K. Holcomb, Vice President &
Chief Financial Officer, Controller
and Treasurer
Dated: March 29, 1999 By: /s/Justin P. Walder
------------------------------------
Justin P. Walder, Secretary and
Director
Dated: March 29, 1999 By: /s/Robert A. Aronson
------------------------------------
Robert A. Aronson, Director
Dated: March 29, 1999 By: /s/Albert G. Besser
------------------------------------
Albert G. Besser, Director
Dated: March 29, 1999 By: /s/Erwin M. Ganz
------------------------------------
Erwin M. Ganz, Director
Dated: March 29, 1999 By: /s/Gerard J. Quinnan
------------------------------------
Gerard J. Quinnan, Director
Dated: March 29, 1999 By: /s/Saul H. Weisman
------------------------------------
Saul H. Weisman, Director
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14 (a) (1) and (2), and (d)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 31, 1998
RONSON CORPORATION
SOMERSET, NEW JERSEY
RONSON CORPORATION FIVE-YEAR SELECTED FINANCIAL DATA
----------------------------------------------------
Dollars in thousands (except per share data)
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Net sales $23,173 $23,170 $25,454 $26,953 $25,583
Earnings from continuing
operations 660 783 335 1,500 1,074
Total assets 14,602 13,519 12,104 13,403 11,887
Long-term obligations 4,195 4,222 2,963 3,312 2,389
Per common share (1,2):
Earnings from continuing
operations:
Basic 0.20 0.26 0.09 0.77 0.52
Diluted 0.20 0.25 0.09 0.57 0.42
(1) Basic Earnings per Common Share assumes no conversion of
preferred shares to common shares and Diluted Earnings per Common
Share assumes full conversion of all preferred shares to common
and includes the dilutive effect of outstanding stock options.
The assumed conversion of preferred shares to common and the
exercise of stock options were anti-dilutive for the years ended
December 31, 1998 and 1996, and, therefore, they were excluded
from the computation of Diluted Earnings per Common Share for
those years.
(2) No dividends on common stock were declared or paid during the
five years ended December 31, 1998.
FORM 10-K -- ITEM 14 (a) (1) and (2)
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements of Ronson Corporation and its
wholly owned subsidiaries are included in Item 8:
Consolidated Balance Sheets - December 31, 1998 and 1997
Consolidated Statements of Operations - Years Ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Changes in Stockholders' Equity - Years Ended
December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows - Years Ended
December 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
The following consolidated financial statement schedules of Ronson
Corporation and its wholly owned subsidiaries to be included in Item 14(d)
will be filed by the Company by amendment before April 30, 1999:
Schedule I Condensed Financial Information
of Company
Schedule II Valuation and Qualifying Accounts
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Ronson Corporation
We have audited the accompanying consolidated balance sheets of Ronson
Corporation and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of operations, changes in stockholders'equity
and cash flows for each of the years in the three-year period ended December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Ronson
Corporation and subsidiaries as of December 31, 1998 and 1997, and the
consolidated results of their operations for each of the years in the
three-year period ended December 31, 1998 in conformity with generally
accepted accounting principles.
/s/DEMETRIUS & COMPANY, L.L.C.
- ------------------------------
DEMETRIUS & COMPANY, L.L.C.
Wayne, New Jersey
March 12, 1999
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- ---------------------------
Dollars in thousands
ASSETS
------ December 31,
----------------
1998 1997
---- ----
CURRENT ASSETS:
Cash and cash equivalents ................................ $ 146 $ 32
Accounts receivable, less allowances for doubtful accounts
of: 1998, $90; 1997, $76 ............................... 1,777 1,865
Inventories:
Finished goods ......................................... 2,189 2,260
Work in process ........................................ 66 62
Raw materials .......................................... 429 695
------- -------
2,684 3,017
Other current assets ..................................... 765 527
Current assets of discontinued operations ................ 682 387
------- -------
TOTAL CURRENT ASSETS ............................... 6,054 5,828
PROPERTY, PLANT AND EQUIPMENT:
Land ..................................................... 19 19
Buildings and improvements ............................... 3,740 3,742
Machinery and equipment .................................. 7,456 7,071
Construction in progress ................................. 471 61
------- -------
11,686 10,893
Less accumulated depreciation and amortization ........... 5,879 5,424
------- -------
5,807 5,469
INTANGIBLE PENSION ASSETS ................................ 256 320
OTHER ASSETS ............................................. 1,202 843
OTHER ASSETS OF DISCONTINUED OPERATIONS .................. 1,283 1,059
------- -------
$14,602 $13,519
======= =======
See notes to consolidated financial statements.
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- ---------------------------
Dollars in thousands (except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------ December 31,
-----------------
1998 1997
---- ----
CURRENT LIABILITIES:
Short-term debt ............................................. $ 2,209 $ 2,713
Current portion of long-term debt ........................... 392 368
Current portion of lease obligations ........................ 97 91
Accounts payable ............................................ 1,941 1,431
Accrued expenses ............................................ 1,790 1,724
Current liabilities of discontinued operations .............. 1,833 1,106
------- -------
TOTAL CURRENT LIABILITIES .............................. 8,262 7,433
LONG-TERM DEBT .............................................. 3,649 3,561
LONG-TERM LEASE OBLIGATIONS ................................. 112 183
PENSION OBLIGATIONS ......................................... 239 394
OTHER LONG-TERM LIABILITIES ................................. 34 36
LONG-TERM LIABILITIES OF DISCONTINUED OPERATIONS ............ 161 48
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, no par value, authorized 5,000,000 shares:
12% cumulative convertible, $0.01 stated value; outstanding
1998 and 1997, 36,518 ..................................... -- --
Common stock par value $1
1998 1997
---- ----
Authorized shares ...................... 11,848,106 11,848,106
Reserved shares ........................ 125,218 139,618
Issued (including treasury) ............ 3,259,507 3,225,607 3,260 3,226
Additional paid-in capital ............... 29,007 28,991
Accumulated deficit ...................... (27,442) (27,153)
Accumulated other comprehensive deficit .. (1,086) (1,606)
------- -------
3,739 3,458
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- ---------------------------
Dollars in thousands (except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------ December 31,
------------------
1998 1997
---- ----
Less cost of treasury shares:
1998, 62,365 and 1997, 62,332 common shares . 1,594 1,594
------- -------
TOTAL STOCKHOLDERS' EQUITY .................. 2,145 1,864
------- -------
$14,602 $13,519
======= =======
See notes to consolidated financial statements.
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
- -------------------------------------
Dollars in thousands (except per share data)
Year Ended December 31,
--------------------------------
1998 1997 1996
---- ---- ----
NET SALES ........................................ $ 23,173 $ 23,170 $ 25,454
-------- -------- --------
Cost and expenses:
Cost of sales .................................. 13,865 14,504 16,522
Selling, shipping and advertising .............. 3,586 3,613 3,650
General and administrative ..................... 3,840 3,384 3,196
Depreciation and amortization .................. 532 490 551
-------- -------- --------
21,823 21,991 23,919
-------- -------- --------
EARNINGS FROM CONTINUING OPERATIONS BEFORE
INTEREST AND OTHER ITEMS ....................... 1,350 1,179 1,535
-------- -------- --------
Other expense:
Interest expense ............................... 645 523 762
Other-net ...................................... 185 107 567
-------- -------- --------
830 630 1,329
-------- -------- --------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES ............................ 520 549 206
Income tax benefits-net .......................... 140 234 129
-------- -------- --------
EARNINGS FROM CONTINUING OPERATIONS .............. 660 783 335
Loss from discontinued operations (net of tax
benefits of: 1998, $557; 1997, $132; 1996, $180) (949) -- (1,190)
-------- -------- --------
NET EARNINGS (LOSS) .............................. $ (289) $ 783 $ (855)
======== ======== ========
EARNINGS (LOSS) PER COMMON SHARE:
Basic:
Earnings from continuing operations ............ $ 0.20 $ 0.26 $ 0.09
Loss from discontinued operations .............. (0.30) -- (0.66)
-------- -------- --------
Net earnings (loss) ............................ $ (0.10) $ 0.26 $ (0.57)
======== ======== ========
Diluted:
Earnings from continuing operations ............ $ 0.20 $ 0.25 $ 0.09
Loss from discontinued operations .............. (0.30) -- (0.66)
-------- -------- --------
Net earnings (loss) ............................ $ (0.10) $ 0.25 $ (0.57)
======== ======== ========
See notes to consolidated financial statements.
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
- ----------------------------------------------------------
For the Years Ended December 31, 1998, 1997 and 1996
Dollars in thousands
Accumu
12% Cumulative lated
Convertible Compre Other Treasury Stock
Preferred Stock Common Stock Additional hensive Compre (at cost)
--------------- ---------------- Paid-in Accumulated Income hensive --------------------------
Shares Amount Shares Amount Capital Deficit (Loss) Deficit Shares Amount Total
------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 847,308 $ 8 1,820,893 $ 1,821 $ 30,308 $ (27,081) $ (1,429) 62,087 $ (1,593) $ 2,034
------- --- --------- ------- -------- --------- -------- ------ -------- -------
Net loss - 1996 (855) $ (855) (855)
------
Translation adjustment (10)
Pensions (38)
------
Other comprehensive loss (48) (48) (48)
------
Comprehensive loss $ (903)
======
Stock options exercised 33,333 33 47 80
Conversion (9,713) -- 9,713 10 (10) --
Treasury shares 18 (1) (1)
------- --- --------- ------- -------- --------- -------- ------ -------- -------
Balance at December 31, 1996 837,595 8 1,863,939 1,864 30,345 (27,936) (1,477) 62,105 (1,594) 1,210
------- --- --------- ------- -------- --------- -------- ------ -------- -------
Net earnings - 1997 783 $ 783 783
------
Translation adjustment (25)
Pensions (104)
------
Other comprehensive loss (129) (129) (129)
------
Comprehensive income $ 654
======
Exchange offer (800,844) (8) 1,361,435 1,362 (1,354) --
Conversion (233) -- 233 -- --
Treasury shares 227 -- --
------- --- --------- ------- -------- --------- -------- ------ -------- -------
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
- ----------------------------------------------------------
For the Years Ended December 31, 1998, 1997 and 1996
Dollars in thousands
Accumu
12% Cumulative lated
Convertible Compre Other Treasury Stock
Preferred Stock Common Stock Additional hensive Compre (at cost)
--------------- ---------------- Paid-in Accumulated Income hensive ---------------------------
Shares Amount Shares Amount Capital Deficit (Loss) Deficit Shares Amount Total
------------------------------------------------------------------------------------------------------
Balance at December 31, 1997 36,518 -- 3,225,607 3,226 28,991 (27,153) (1,606) 62,332 (1,594) 1,864
------- --- --------- ------- -------- --------- -------- ------ -------- -------
Net loss - 1998 (289) $ (289) (289)
----
Translation adjustment (35)
Pensions 555
----
Other comprehensive income 520 520 520
----
Comprehensive income $ 231
====
Shares issued for:
Stock options exercised 13,900 14 3 17
Other 20,000 20 30 50
Stock option purchased (17) (17)
Treasury shares 33 -- --
------- --- --------- ------- -------- --------- -------- ------ -------- -------
Balance at December 31, 1998 36,518 $-- 3,259,507 $ 3,260 $ 29,007 $ (27,442) $ (1,086) 62,365 $ (1,594) 2,145
======= === ========= ======= ======== ========= ======== ====== ======== =======
See notes to consolidated financial statements.
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------
Dollars in thousands
Year Ended December 31,
------------------------------
1998 1997 1996
---- ---- ----
Cash Flows from Operating Activities:
Net earnings (loss) .................................... $ (289) $ 783 $ (855)
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation and amortization ....................... 532 490 551
Deferred income tax benefits ........................ (727) (225) (390)
Increase (decrease) in cash from changes in:
Accounts receivable .............................. 88 (248) 323
Inventories ...................................... 426 737 1,412
Other current assets ............................. (93) (73) 133
Accounts payable ................................. 417 (46) 49
Accrued expenses ................................. 21 (72) (84)
Net change in pension-related accounts .............. 209 (56) (30)
Other ............................................... (54) 57 137
Discontinued operations ............................. 864 (791) 685
------- ------- -------
Net cash provided by operating activities ........ 1,394 556 1,931
------- ------- -------
Cash Flows from Investing Activities:
Net cash used in investing activities,
capital expenditures ............................ (845) (2,138) (504)
------- ------- -------
Cash Flows from Financing Activities:
Proceeds from long-term debt ........................... 489 2,085 400
Proceeds from short-term debt .......................... 1,085 1,431 1,847
Proceeds from exercise of stock options ................ 17 -- 80
Proceeds from issuance of common stock ................. 50 -- --
Payments of long-term debt ............................. (377) (970) (665)
Payments of long-term lease obligations ................ (93) (110) (78)
Payments of short-term debt ............................ (1,589) (938) (2,959)
Other .................................................. (17) -- --
------- ------- -------
Net cash provided by (used in)
financing activities .......................... (435) 1,498 (1,375)
------- ------- -------
Net increase (decrease) in cash ........................ 114 (84) 52
Cash at beginning of year .............................. 32 116 64
------- ------- -------
Cash at end of year .................................... $ 146 $ 32 $ 116
======= ======= =======
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation - The consolidated financial statements
include the accounts of Ronson Corporation (the "Company") and its
subsidiaries, all of which are wholly owned. Its principal subsidiaries are
Ronson Consumer Products Corporation ("RCPC"), Woodbridge, New Jersey; Ronson
Corporation of Canada, Ltd. ("Ronson-Canada"), Mississauga, Ontario, Canada
(together "Ronson Consumer Products"); Ronson Aviation, Inc. ("Ronson
Aviation"), Trenton, New Jersey; and Prometcor, Inc., ("Prometcor"), formerly
known as Ronson Metals Corporation, Newark, New Jersey. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the period. Actual results could differ from those estimates.
Property and Depreciation - Property, plant and equipment are carried at
cost and are depreciated over their estimated useful lives using the
straight-line method. Capitalized leases are amortized over their estimated
useful lives using the straight-line method. Leasehold improvements are
amortized over their estimated useful lives or the remaining lease terms,
whichever is shorter. At December 31, 1998 and 1997, aircraft and other
related costs utilized by Ronson Aviation in its charter operations and held
for more than one year were classified as property, plant and equipment. The
term notes payable secured by the above-mentioned aircraft were also
classified as long-term debt.
Inventories - Inventories, other than aircraft, are valued at the lower
of average cost or market. Aircraft inventory is carried at the lower of
cost, specific identification, or market.
Foreign Currency Translation - All balance sheet accounts of the
Company's foreign subsidiary, Ronson-Canada, are translated at the current
exchange rate as of the end of the year. All income statement accounts are
translated at average currency exchange rates. Stockholders' Equity accounts
are translated at historical exchange rates. The resulting translation
adjustment is recorded as part of Accumulated Other Comprehensive Deficit in
Stockholders' Equity. Transaction gains and losses are not significant in the
periods presented.
Fair Value of Financial Instruments - The Company has adopted Statement
of Financial Accounting Standards ("SFAS") #107 "Disclosures about Fair Value
of Financial Instruments" which requires all entities to disclose the fair
value of financial instruments for which it is practicable to estimate fair
value.
The Company's financial instruments include cash, accounts receivable,
accounts payable, accrued expenses and other current liabilities and
long-term debt. The book values of cash, accounts receivable, accounts
payable and accrued expenses and other current liabilities are representative
of their fair values due to the short-term maturity of these instruments. The
book value of the Company's long-term debt is considered to approximate its
fair value, based on current market rates and conditions.
Research and Development Costs - Costs of research and new product
development are charged to operations as incurred and amounted to
approximately $164,000, $141,000 and $134,000 for the years ended December
31, 1998, 1997 and 1996, respectively.
Advertising Costs - Costs of advertising are expensed as incurred and
amounted to approximately $295,000, $446,000 and $561,000 for the years ended
December 31, 1998, 1997 and 1996, respectively.
Income Taxes - In accordance with SFAS #109, "Accounting for Income
Taxes", in 1998, 1997 and 1996, the Company recorded net deferred income tax
assets of $727,000, $225,000 and $390,000, respectively.
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):
Year Ended December 31, 1998
----------------------------
Earnings Per Share
(Loss) Shares Amount
-------- ------ ---------
Earnings from continuing
operations......................... $ 660
Less accrued dividends on
preferred stock.................... (8)
--------
Continuing operations................ 652 3,183 $ 0.20
Loss from discontinued operations.... (949) 3,183 (0.30)
-------- --------
BASIC $ (297) 3,183 $ (0.10)
======== ===== ========
Effect of dilutive securities (1):
Stock options...................... --
Cumulative convertible
preferred stock................... -- --
-------- -----
Continuing operations................ 652 3,183 $ 0.20
Loss from discontinued operations.... (949) 3,183 (0.30)
-------- --------
DILUTED $ (297) 3,183 $ (0.10)
======== ===== ========
Year Ended December 31, 1997
----------------------------
Per Share
Earnings Shares Amount
-------- ------ ---------
Earnings from continuing
operations......................... $ 783
Less accrued dividends on
preferred stock.................... (8)
--------
Continuing operations................ 775 2,958 $ 0.26
Loss from discontinued operations.... -- 2,958 --
-------- -------
BASIC 775 2,958 $ 0.26
======== ===== =======
Effect of dilutive securities:
Stock options...................... 11
Cumulative convertible
preferred stock................... 8 161
-------- -----
Continuing operations................ 783 3,130 $ 0.25
Loss from discontinued operations.... -- 3,130 --
-------- --------
DILUTED $ 783 3,130 $ 0.25
======== ===== ========
Year Ended December 31, 1996
----------------------------
Earnings Per Share
(Loss) Shares Amount
-------- ------- --------
Earnings from continuing
operations......................... $ 335
Less accrued dividends on
preferred stock.................... (176)
--------
Continuing Operations................ 159 1,792 $ 0.09
Loss from discontinued operations.... (1,190) 1,792 (0.66)
-------- -----
BASIC $ (1,031) 1,792 $(0.57)
======== ===== ======
Effect of dilutive securities (1):
Stock options...................... --
Cumulative convertible
preferred stock................... -- --
-------- -----
Continuing Operations................ 159 1,792 $ 0.09
Loss from discontinued operations.... (1,190) 1,792 (0.66)
-------- -----
DILUTED $ (1,031) 1,792 $(0.57)
======== ===== ======
(1) The assumed conversion of preferred shares to common shares and the
stock options were anti-dilutive for the years ended December 31, 1998
and 1996, and, therefore, were excluded from the calculation and
reconciliation of Diluted Earnings (Loss) per Common Share for those
periods.
Stock Options - The Company has elected to follow Accounting Principles
Board Opinion #25, "Accounting for Stock Issued to Employees" (APB #25), and
related Interpretations in accounting for its employee stock options because,
as discussed below, the alternative fair value accounting provided for under
SFAS #123, "Accounting for Stock-Based Compensation", requires use of option
valuation models that were not developed for use in valuing employee stock
options. Under APB #25, because the exercise price of the Company's employee
stock options equals or exceeds the market price of the underlying stock on
the date of grant, no compensation expense is recognized.
On November 15, 1996, the Company issued an offer to exchange 1.7 shares
of its common stock for each share of preferred stock outstanding. After the
expiration of the offer on September 30, 1997, the Company had accepted a
total of 800,844 shares of preferred stock and had issued a total of
1,361,435 shares of common stock in exchange under the Company's Exchange
Offer. At December 31, 1998, the Company had outstanding 36,518 shares of
preferred stock and 3,197,142 shares of common stock.
Note 2. DISCONTINUED OPERATIONS:
The Loss from Discontinued Operations included the costs
recorded by the Company related to the discontinuance of Prometcor as follows
(in thousands):
Year Ended December 31,
1998 1997 1996
---- ---- ----
Discontinuance costs accrued ....... $1,506 $ -- $1,370
Deferred income tax benefit ........ (557) -- (180)
------ ------ ------
Loss from Discontinued Operations .. $ 949 $ -- $1,190
====== ====== ======
In December 1989 the Company adopted a plan to discontinue the
operations of its wholly owned subsidiary, Ronson Metals Corporation,
subsequently renamed Prometcor. Upon the cessation of operations, Prometcor
began its compliance with the environmental requirements of the New Jersey
Industrial Site Recovery Act ("ISRA") administered by the New Jersey
Department of Environmental Protection ("NJDEP") and other applicable State
laws with the objective of selling the land and existing buildings previously
used in the discontinued operations. The discontinuance of operations also
required the termination of a United States Nuclear Regulatory Commission
("NRC") license obtained in 1984 for the storage and use on site of a
radioactive element to be used in a new product, the sales of which were
minimal.
The total costs and expenses related to the termination of
Prometcor's business operations in 1990, less the expected gain from the
eventual sale of Prometcor's assets, have been estimated, based on the latest
available information, to be about $5,770,000. These estimated costs and
expenses consist of: Prometcor's expenses for the completion of compliance
with the NJDEP and NRC environmental regulations; the termination of
Prometcor's business operations; environmental consulting costs, legal and
other professional fees; and costs for the maintenance of the Prometcor
property, including insurance and taxes. These costs and expenses, net of
deferred income tax benefits, have been charged against the Company's Loss
from Discontinued Operations and Net Earnings (Loss) between the beginning of
1990 and year end 1998. The liability for these estimated costs and expenses
as recorded in the financial statements at December 31, 1998, was based on
the lower limit of the range of costs as projected by the Company. The
estimated upper limit of the range of costs is approximately $1,000,000 above
the lower limit.
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.
Prometcor is being accounted for as a discontinued operation,
and, accordingly, its operating results are reported in this manner in all
years presented in the accompanying Consolidated Statements of Operations and
other related operating statement data.
The assets and liabilities of Prometcor are reflected in the
Consolidated Balance Sheets under assets and liabilities of discontinued
operations. At December 31, 1998, Other Assets of Discontinued Operations
consisted primarily of land and buildings and net deferred income tax assets
of Prometcor. The Current Liabilities of Discontinued Operations at December
31, 1998, consisted principally of $1,665,000 of accrued costs related to the
environmental compliance of Prometcor and accrued costs related to
discontinuance of Prometcor.
Note 3. INCOME TAXES:
At December 31, 1998, the Company had, for federal income tax purposes,
net operating loss carryforwards of approximately $7,300,000, expiring as
follows: $2,750,000 in 1999; $800,000 in 2000 to 2001; $1,750,000 in 2005 to
2007; and $2,000,000 in 2010 to 2012. The Company also had available
alternative minimum tax credit carryforwards of approximately $60,000.
The income tax benefits (expenses) consisted of the following (in
thousands):
Year Ended December 31,
1998 1997 1996
---- ---- ----
Current:
State. . . . . . . . . . . . . . . . . . . . $ (30) $ 141 $ (81)
----- ----- -----
Deferred:
Federal. . . . . . . . . . . . . . . . . . . 498 170 342
State. . . . . . . . . . . . . . . . . . . . 229 55 48
----- ----- -----
727 225 390
----- ----- -----
697 366 309
Allocated to discontinued operations . . . . . 557 132 180
----- ----- -----
Income tax benefits-net. . . . . . . . . . . $ 140 $ 234 $ 129
===== ===== =====
The reconciliation of estimated income taxes attributed to continuing
operations at the United States statutory tax rate to reported income tax
benefits (expenses) is as follows (in thousands):
Year Ended December 31,
1998 1997 1996
---- ---- ----
Tax expense amount computed using
statutory rate. . . . . . . . . . . . . . . . $(177) $(187) $ (70)
State taxes, net of federal benefit . . . . . . (20) (93) (53)
Operations outside the US . . . . . . . . . . . 27 2 4
Recognition of deferred income tax assets:
Federal . . . . . . . . . . . . . . . . . . . 498 170 162
State . . . . . . . . . . . . . . . . . . . . 229 55 48
Discontinued operations and other . . . . . . . (417) 287 38
----- ----- -----
Income tax benefits-net . . . . . . . . . . . $ 140 $ 234 $ 129
===== ===== =====
The tax effects of temporary differences that give rise to significant
portions of the deferred income tax assets and deferred income tax
liabilities are presented below (in thousands):
December 31,
1998 1997
---- ----
Deferred income tax assets:
Inventories, principally due to additional costs
inventoried for tax purposes pursuant to the Tax
Reform Act of 1986 and valuation reserves
for financial reporting purposes. . . . . . . . . . . $ 108 $ 167
Compensated absences, principally due to accrual for
financial reporting purposes. . . . . . . . . . . . . 131 115
Compensation, principally due to accrual
for financial reporting purposes. . . . . . . . . . . 118 93
Accrual of projected environmental costs, principally
related to Prometcor's compliance with NJDEP and NRC
requirements. . . . . . . . . . . . . . . . . . . . . 878 360
Net operating loss carryforwards. . . . . . . . . . . . 3,067 4,452
Alternative minimum tax and
investment tax credit carryforwards . . . . . . . . . 104 124
Other . . . . . . . . . . . . . . . . . . . . . . . . . 132 126
------ ------
Total gross deferred income tax assets. . . . . . . . 4,538 5,437
Less valuation allowance. . . . . . . . . . . . . . . 1,400 3,059
------ ------
Net deferred income tax assets. . . . . . . . . . . . 3,138 2,378
------ ------
Deferred income tax liabilities:
Pension expense, due to contributions in excess of
net accruals. . . . . . . . . . . . . . . . . . . . . 502 570
Other . . . . . . . . . . . . . . . . . . . . . . . . . 254 153
------ ------
Total gross deferred income tax liabilities . . . . . 756 723
------ ------
Net deferred income taxes . . . . . . . . . . . . . . $2,382 $1,655
====== ======
A valuation allowance is provided when it is more likely than not that
some portion or all of the deferred income tax assets will not be realized. A
valuation allowance has been established based on the likelihood that a
portion of the deferred income tax assets will not be realized. Realization
is dependent on generating sufficient taxable income prior to expiration of
the loss carryforwards. Management has assessed the Company's recent
operating earnings history and expected future earnings. Based on these past
and future earnings, on the expected completion of compliance by Prometcor
with environmental regulations and on tax planning strategies, although
realization is not assured, management believes it is more likely than not
that $3,138,000 of the deferred income tax assets will be realized. The
ultimate realization of the deferred income tax assets will require aggregate
taxable income of approximately $5,100,000 in the years prior to the
expiration of the net operating loss carryforwards in 2012. The amount of the
deferred income tax assets considered realizable, however, could be reduced
in the near term if estimates of future taxable income during the
carryforward periods are reduced. A portion of the deferred income tax asset
is the result of a tax planning strategy for state income tax purposes of
merging certain of the Company's subsidiaries resulting in realization of net
operating loss carryforwards. The valuation allowance was reduced from
$3,059,000 at December 31, 1997, to $1,400,000 at December 31, 1998, and from
$4,035,000 at December 31, 1996, to $3,059,000 at December 31, 1997.
The net deferred income tax assets are classified in the Consolidated
Balance Sheets as follows (in thousands):
December 31,
1998 1997
---- ----
Current:
Other current assets .......................... $ 332 $ 182
Current assets of discontinued operations ..... 405 87
------ ------
Total current ............................... 737 269
------ ------
Long-term:
Other assets .................................. 675 641
Other assets of discontinued operations ....... 970 745
------ ------
Total long-term ............................. 1,645 1,386
------ ------
Total net deferred income tax assets ............ $2,382 $1,655
====== ======
Note 4. SHORT-TERM DEBT:
Composition (in thousands):
December 31,
1998 1997
---- ----
Revolving loans (a). . . . . . . . . . . . . . . $ 1,420 $ 2,170
Notes payable, commercial finance companies (b). 789 543
------- -------
Total short-term debt. . . . . . . . . . . . . . $ 2,209 $ 2,713
======= =======
(a) In 1995 RCPC entered into an agreement with Summit Bank ("Summit")
for a Revolving Loan and a Term Loan. In March 1997 RCPC and Summit extended
RCPC's Revolving Loan to June 30, 2000. The extended agreement also amended
certain other terms of the Revolving Loan agreement. The Revolving Loan of
$1,315,000 at December 31, 1998, provides a line of credit up to $2,500,000
to RCPC based on accounts receivable and inventory. The balance available
under the Revolving Loan is determined by the level of receivables and
inventory. The Term Loan was paid in full in April 1998. The Revolving Loan
currently bears interest at the rate of 1.5% above Summit's prime rate (7.75%
at December 31, 1998). The Revolving Loan is payable on demand under an
agreement which expires June 30, 2000. The Revolving Loan is secured by the
accounts receivable, inventory and machinery and equipment of RCPC; a second
mortgage on the land, buildings and improvements of RCPC; and the guarantee
of the Company. At December 31, 1998, RCPC also had outstanding Letters of
Credit of approximately $110,000. The Summit agreement also has restrictive
covenants which, among other things, limit the transfer of assets between the
Company and its subsidiaries.
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 $14,583 from October 1997
to March 1998, and is currently being reduced in monthly amounts of $20,833
from April 1998 to June 1999. The outstanding amount under the agreement for
the additional available loan of $125,000 as of December 31, 1998, is
included in the balance of the Revolving Loan in the paragraph above.
In 1995 Ronson-Canada entered into an agreement with Canadian Imperial
Bank of Commerce ("CIBC") for a line of credit of C$250,000. In 1998
Ronson-Canada and CIBC extended Ronson-Canada's Revolving Loan to 1999. The
extended agreement also amended certain other terms of the Revolving Loan
agreement. The Revolving Loan balance of $105,000 (C$160,000) at December 31,
1998, under the line of credit is secured by the accounts receivable and
inventory of Ronson-Canada, and the amounts available under the line are
based on the level of accounts receivable and inventory. The loan bears
interest at the rate of 1.25% (down from the prior 1.5%) over the CIBC prime
rate (6.75% at December 31, 1998). The line of credit, payable on demand, is
guaranteed by the Company. The CIBC agreement has restrictive covenants
which, among other things, limit the transfer of assets from Ronson-Canada to
RCPC and the Company.
Based on the amount of the loans outstanding and the levels of accounts
receivable and inventory at December 31, 1998, Ronson Consumer Products had
unused borrowings available at December 31, 1998, of about $225,000 under the
Summit and CIBC lines of credit described above. (Refer to Note 5 below for
information regarding the book value of assets pledged as collateral for the
debt in (a) above.)
(b) At December 31, 1998, the notes payable, commercial finance
companies, consisted of notes payable by Ronson Aviation as follows: 1)
$707,000 due to Raytheon Aircraft Credit Corp. ("Raytheon"); and 2) $82,000
due to Green Tree Financial Servicing Corporation ("Green Tree"). Notes
payable to these commercial finance companies by Ronson Aviation are each
collateralized by specific aircraft, and the notes are repaid from the
proceeds from the sale of the aircraft. The Raytheon note bears interest at a
rate of 1.5% over the prime rate (7.75% at December 31, 1998) and the Green
Tree note bears interest at the rate of 11%. The notes are secured by
aircraft inventory of Ronson Aviation with a book value of $850,000 at
December 31, 1998.
In August 1997 Ronson Aviation entered into an agreement with Summit for
a Revolving Loan and a Term Loan (refer to Note 5(b) below regarding the Term
Loan). The Revolving Loan, which had not yet been utilized at December 31,
1998, provides a line of credit up to $400,000 to Ronson Aviation based on
the level of its accounts receivable. The Revolving Loan currently bears
interest at the rate of 1.5% above Summit's prime rate (7.75% at December 31,
1998) and is payable on demand under an agreement which expires June 30,
2000. The Revolving Loan and Term Loan are secured by the accounts
receivable, inventory and machinery and equipment of Ronson Aviation, and the
guarantees of the Company and RCPC. The Summit agreement also contains
restrictive covenants.
Ronson Aviation had no outstanding loans under the Summit Revolving Loan
at December 31, 1998. Based on the level of accounts receivable, Ronson
Aviation had unused borrowings of about $294,000 under the Summit line of
credit at December 31, 1998.
At December 31, 1998, the weighted average interest rate for the total
short-term debt was 9.1%.
Note 5. LONG-TERM DEBT:
Composition (in thousands):
December 31,
1998 1997
---- ----
Mortgage loan payable, Summit (a) . . . . . . . $ 1,219 $ 1,248
Term note payable, Summit (b) . . . . . . . . . 214 296
Notes payable, bank (c) . . . . . . . . . . . . 2,350 2,385
Promissory term note payable (d). . . . . . . . 245 --
Other . . . . . . . . . . . . . . . . . . . . . 13 --
------- -------
4,041 3,929
Less portion in current liabilities . . . . . . 392 368
------- -------
Balance of long-term debt . . . . . . . . . . . $ 3,649 $ 3,561
======= =======
(a) On December 1, 1995, the Company and RCPC entered into a Mortgage
Loan agreement with Summit in the original amount of $1,300,000. The loan
with a balance of $1,219,000 at December 31, 1998, is secured by a first
mortgage on the land, buildings and improvements of RCPC and is payable in
sixty monthly installments of $11,589, including interest, and a final
installment on December 1, 2000, of $1,155,000. The loan bears interest at a
fixed rate of 8.75%.
(b) In August 1997 Ronson Aviation entered into a Term Loan agreement
with Summit in the original amount of $285,000. On October 26, 1998, the Term
Loan was amended, extending its maturity to June 30, 2000. The Term Loan with
a balance of $214,000 at December 31, 1998, is payable in thirty-three
monthly installments of $4,750 plus interest from October 1, 1997, and a
final installment on June 30, 2000, of $128,000. The Term Loan bears interest
at the rate of 1.5% above Summit's prime rate. (Refer to Note 4(b) above.)
(c) The notes payable, bank, consisted of six term loans payable by
Ronson Aviation to Summit. The notes bear interest at the rate of 1.5% over
the prime rate, are collateralized by specific aircraft with a net book value
of $3,221,000 at December 31, 1998, and are guaranteed by the Company. Two of
the notes, in the amount of approximately $523,000 at December 31, 1998, are
payable in monthly installments totalling $6,375 plus interest through
October 2000 with a final payment of about $383,000 on October 5, 2000. The
other four notes in the amount of approximately $1,827,000 at December 31,
1998, are payable in monthly installments totalling $16,883 plus interest
through November 2002 with a final payment of about $1,034,000 on December
20, 2002.
(d) On September 15, 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 $245,000 at
December 31, 1998, is payable in 120 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 proceeds of the Promissory Term
Note are being used to finance the construction of Ronson Aviation's new
aircraft fueling facilities. The Promissory Term Note is secured by the
leased premises of the fueling facilities complex and all related equipment.
At December 31, 1998, fixed assets with a net book value of $4,683,000
and accounts receivable and inventories of $4,479,000 are pledged as
collateral for the debt detailed in Notes 4 and 5 above.
Net assets of consolidated subsidiaries, excluding intercompany
accounts, amounted to approximately $2,520,000 at December 31, 1998,
substantially all of which was restricted as to transfer to the Company and
its other subsidiaries due to various covenants of their debt agreements at
December 31, 1998.
Long-term debt matures as follows: 1999, $392,000; 2000, $2,017,000;
2001, $228,000; 2002, $1,242,000; 2003, $25,000; and 2004 through 2008,
$137,000.
Note 6. LEASE OBLIGATIONS:
Lease expenses consisting principally of office and warehouse rentals,
totalled $476,000, $476,000 and $539,000 for the years ended December 31,
1998, 1997 and 1996, respectively. Sublease income amounted to $27,000 and
$168,000 for the years ended December 31, 1997 and 1996, respectively (none
in 1998).
At December 31, 1998, the Company's future minimum lease payments under
operating and capitalized leases with initial or remaining noncancellable
lease terms in excess of one year are presented in the table below (in
thousands):
Operating Capitalized
Total Leases Leases
----- ------ ------
Year Ending December 31:
1999 . . . . . . . . . . . $ 402 $ 276 $ 126
2000 . . . . . . . . . . . 337 245 92
2001 . . . . . . . . . . . 100 92 8
2002 . . . . . . . . . . . 6 1 5
2003 . . . . . . . . . . . 4 -- 4
----- ----- -----
Total obligations. . . . . $ 849 $ 614 235
===== =====
Less: Amount representing
interest. . . . . . 26
-----
Present value of capitalized
lease obligations . . . $ 209
=====
Capitalized lease property included in the Consolidated Balance Sheets
is presented below (in thousands):
December 31,
1998 1997
---- ----
Machinery and equipment . . . . . . . . $ 642 $ 613
Less accumulated amortization . . . . . 204 141
----- -----
$ 438 $ 472
===== =====
Note 7. RETIREMENT PLANS:
The Company and its subsidiaries have several trusteed retirement plans
covering substantially all employees. The Company's funding policy is to make
minimum annual contributions as required by applicable regulations. Plans
covering union members generally provide benefits of stated amounts for each
year of service. The Company's salaried pension plan provides benefits using
a formula which is based upon employee compensation. On June 30, 1985, the
Company amended its salaried pension plan so that benefits for future service
would no longer accrue. A defined contribution plan was established on July
1, 1985, in conjunction with the amendments to the salaried pension plan.
Plan assets primarily include widely-held common stocks, U.S. Treasury
Securities, 171,300 shares of common stock of the Company, and money market
funds.
The following tables set forth the plans' aggregate funded status and
amounts recognized in the Company's Consolidated Balance Sheets (in
thousands):
December 31,
1998 1997
---- ----
Change in Benefit Obligation:
Benefit obligation at beginning of year.... $ 4,709 $ 4,599
Service cost............................... 15 17
Interest cost.............................. 330 333
Benefit increase........................... -- 25
Actuarial loss............................. 171 63
Increase in benefit obligation due to
decreased discount rate.................. 175 85
Benefits paid.............................. (484) (413)
------- -------
Benefit obligation at end of year.......... 4,916 4,709
------- -------
Change in Plan Assets:
Fair value of plan assets at beginning
of year.................................. 4,185 4,085
Actual return on plan assets............... 997 177
Employer contributions..................... 104 336
Benefits paid.............................. (484) (413)
------- -------
Fair value of plan assets at end of year... 4,802 4,185
------- -------
Funded status.............................. (114) (524)
Unrecognized actuarial loss................ 990 1,545
Unrecognized prior service cost and
transition obligation.................... 256 320
------- -------
Net amount recognized........................ $ 1,132 $ 1,341
======= =======
Amounts Recognized in the Statement of
Financial Position Consist of:
Prepaid benefit cost..................... $ 300 $ --
Accrued benefit liability................ (414) (524)
Intangible asset......................... 256 320
Accumulated other comprehensive income... 990 1,545
------- -------
Net amount recognized........................ $ 1,132 $ 1,341
======= =======
1998 1997
---- ----
Weighted-average assumptions as of December 31:
Discount rate.............................. 6.50% 7.00%
Expected return on plan assets............. 6.08% 6.86%
If the additional minimum liability recorded exceeds unrecognized prior
service cost and the unrecognized net obligation at transition, that
difference, an unrecognized net loss, is to be reported as a separate
component of Stockholders' Equity. This unrecognized net loss is being
amortized over future periods as a component of pension expense.
The Company's Consolidated Statements of Operations included pension
expense consisting of the following components (in thousands):
Year Ended December 31,
1998 1997 1996
---- ---- ----
Components of net periodic benefit cost:
Service cost. . . . . . . . . . . $ 15 $ 17 $ 18
Interest cost . . . . . . . . . . 330 333 339
Expected return on plan assets. . (257) (275) (279)
Amortization of prior service
cost and transition obligation. 63 62 62
Recognized actuarial loss . . . . 163 141 125
------ ------ ------
Net pension expense . . . . . . . $ 314 $ 278 $ 265
====== ====== ======
The accumulated benefit obligation and fair value of plan assets for the
pension plan with an accumulated benefit obligation in excess of plan assets
were $513,000 and $99,000, respectively, as of December 31, 1998, and
$519,000 and $142,000, respectively, as of December 31, 1997.
The Company contributes to its defined contribution plans at the rate of
1% of each covered employee's compensation. The Company also contributes an
additional amount equal to 50% of a covered employee's contribution to a
maximum of 1% of compensation. Expenses of about $71,000, $70,000 and $66,000
for this plan were recorded in 1998, 1997 and 1996, respectively.
Note 8. COMMITMENTS AND 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 that entity to
also be 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
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. As of December
31, 1998, 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 is currently in negotiations 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 and for
the installation of the new storage tanks, because the former tanks are owned
by Mercer. In addition, most of the tanks pre-date the leases between Ronson
Aviation and Mercer. The negotiations with Mercer may result in: 1) Mercer
assuming responsibility for the new fueling facility, closure and removal of
the former tanks, and all soil and groundwater remediation, if any, found to
be required; 2) Ronson Aviation being responsible for the construction of the
new fueling facilities, Mercer assuming responsibility for the closure and
removal of the former tanks, and all or some of the soil and groundwater
remediation, with the cost incurred by Ronson Aviation to be deemed to meet
the requirements on the lease for three five-year extensions through November
2022; or 3) some other allocation of responsibility for the costs. The
Company intends to vigorously pursue its rights under the leasehold and under
the statutory and regulatory requirements. Since the ultimate allocation of
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,
but 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 expended
approximately $57,000 in 1998 and accrued about $78,000 in 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 at
December 31, 1998.
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.
The Company has employment contracts with an officer of the
Company and an officer of a subsidiary. The contracts expire on December 31,
2002 and 2000, respectively. Base salaries in the years 1999, 2000, 2001 and
2002 are $671,408, $716,466, $606,119, and $648,547, respectively. The
contract with the officer of the Company also provides for additional
compensation and benefits, including a death benefit equal to two years'
salary.
Note 9. PREFERRED STOCK:
Each share of 12% Cumulative Convertible Preferred Stock has a stated
value of $0.01 per share and a liquidation preference of $1.75 per share
($64,000 at December 31, 1998, in the aggregate) plus accrued dividends. The
shares are non-voting and have a right to cumulative dividends at the annual
rate of $0.21 per share. The holders of the preferred shares may, at any
time, convert each preferred share into one share of common stock unless the
preferred shares were previously redeemed. The Company has the option to
redeem all or part of the preferred stock at $2.25 per share plus accrued
dividends.
On November 15, 1996, the Company issued an Offer to owners of its 12%
Cumulative Convertible Preferred Stock to exchange their shares of preferred
stock for shares of common stock at the rate of 1.7 shares of common stock
for each share of preferred. The Company's Exchange Offer expired on
September 30, 1997. After the expiration of the Offer, the Company had
accepted 800,844 shares of preferred stock for exchange and had issued
1,361,435 shares of common stock under the Company's Exchange Offer.
Dividends in arrears at December 31, 1998, totalled $1.3125 per share of
preferred stock (twenty-five quarters at $0.0525 per share per quarter), or
approximately $48,000 in the aggregate.
In October 1998 the Company declared a dividend of one Preferred Stock
Purchase Right ("Right") for each outstanding share of the Company's common
stock. The Rights are not presently exercisable. Each Right entitles the
holder, upon the occurrence of certain specified events, to purchase from the
Company one one-thousandth of a share of Series A Preferred Stock at a
purchase price of $20 per share. The Rights further provide that each Right
will entitle the holder, upon the occurrence of certain other specified
events, to purchase from the Company, common stock having a value of twice
the exercise price of the Right and, upon the occurrence of certain other
specified events, to purchase from another person into which the Company was
merged or which acquired 50% or more of the Company's assets or earnings
power, common stock of such other person having a value of twice the exercise
price of the Right. The Rights may be generally redeemed by the Company at a
price of $0.01 per Right. The Rights expire on October 27, 2008.
Note 10. STOCK OPTIONS:
The Company has two incentive stock option plans which provide for the
grant of options to purchase shares of the Company's common stock. The
options may be granted to officers and other key employees of the Company and
its subsidiaries (including directors if they are also employees of the
Company or one of its subsidiaries) at not less than 100% of the fair market
value on the date on which options are granted. In August 1996 the
stockholders approved the adoption of the Company's 1996 Incentive Stock
Option Plan which provides for the grant of options for up to 100,000 shares
of common stock. In August 1987 the stockholders approved the adoption of the
Company's 1987 Incentive Stock Option Plan, which provides for the grant of
options for up to 66,666 shares of common stock. After January 21, 1997, no
further options were permitted to be granted under the 1987 plan. Options
granted under the 1987 plan are exercisable at any time within five years
from the date of grant, at which time such options expire. Options granted
under the 1996 plan are exercisable after six months from the date of the
grant and within five years of the grant date, at which time such options
expire. All options are vested on the date of the grant.
Pro forma information regarding earnings (loss) per common share is
required by SFAS #123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
statement. No options were granted by the Company in 1998 and 1997, and,
therefore, no estimated compensation would be applicable in 1998 and 1997. In
1996 the fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted
average assumptions: risk-free interest rate of 6.5%; dividend yield of 0%;
volatility factor of the expected market price of the Company's common stock
of 0.5; and a weighted average expected life of the option of five years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which are fully transferable. In
addition, option valuation models require the input of highly subjective
assumptions including the expected stock price volatility. Because the
Company's employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
The Company's pro forma results of operations after adjustment for the
estimated compensation expense under SFAS #123 were as follows (in thousands,
except per share data):
Year Ended December 31,
1998(1) 1997(1) 1996
------- ------- -------
Pro forma Results of Operations:
Earnings from continuing operations..... $ 660 $ 783 $ 210
Loss from discontinued operations....... (949) -- (1,190)
------- ------- -------
Net earnings (loss)..................... $ (289) $ 783 $ (980)
======= ======= =======
Pro forma Earnings (Loss) per Common Share:
Basic:
Earnings from continuing operations... $ 0.20 $ 0.26 $ 0.02
Loss from discontinued operations..... (0.30) -- (0.66)
------- ------- -------
Net earnings (loss)................... $ (0.10) $ 0.26 $ (0.64)
======= ======= =======
Diluted:
Earnings from continuing operations... $ 0.20 $ 0.25 $ 0.02
Loss from discontinued operations..... (0.30) -- (0.66)
------- ------- -------
Net earnings (loss)................... $ (0.10) $ 0.25 $ (0.64)
======= ======= =======
(1) Since no options were issued in 1998 and 1997, no pro forma adjustments
have been made above.
A summary of the Company's stock option activity and related information
for the three years ended December 31, 1998, is as follows:
Number of Weighted Average
Options Exercise Price
------- --------------
Outstanding at December 31, 1995........ 70,066 $ 1.82
Granted............................... 87,200 2.88
Exercised............................. (33,333) 2.39
Expired............................... (20,083) 1.49
------
Outstanding at December 31, 1996........ 103,850 2.59
Expired............................... (750) 2.88
------
Outstanding at December 31, 1997........ 103,100 2.58
Exercised............................. (13,900) 1.20
Expired............................... (500) 2.88
------
Outstanding and Exercisable
at December 31, 1998.................. 88,700 $ 2.80
====== ======
Exercise prices for options outstanding as of December 31, 1998, ranged
as follows: 15,500 options from $1.63 to $2.25 per share and 73,200 options
from $2.88 to $3.16 per share. The weighted average contractual life of those
options is 2.5 years.
Note 11. STATEMENTS OF CASH FLOWS:
Certificates of deposit that have a maturity of 90 days or more are not
considered cash equivalents for purposes of the accompanying Consolidated
Statements of Cash Flows.
Supplemental disclosures of cash flow information are as follows (in
thousands):
Year Ended December 31,
1998 1997 1996
---- ---- ----
Cash Payments for:
Interest. . . . . . . . . . $ 615 $ 508 $ 747
Income taxes. . . . . . . . . 26 45 85
Financing & Investing Activities
Not Affecting Cash:
Capital lease obligations incurred . 28 26 361
Note 12. 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.
The consumer products segment produces packaged fuels, flints,
refillable lighters and ignitors, a penetrant spray lubricant, a spot
remover, and a surface protectant, which are distributed through
distributors, food brokers, automotive and hardware representatives and chain
stores. Ronson Consumer Products is a principal supplier of packaged flints
and lighter fuels in the United States and Canada.
The aviation services segment represents the chartering, servicing and
sales of fixed wing aircraft and servicing of helicopters. Aircraft are sold
through Company sales personnel. Ronson Aviation provides a wide range of
general aviation services to the general public and to government agencies
located in the vicinity of its facilities in Trenton, New Jersey.
The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. The Company evaluates
performance based on profit or loss from continuing operations before
intercompany charges and income taxes.
Financial information by industry segment is summarized below (in
thousands):
Year Ended December 31,
1998 1997 1996
---- ---- ----
Net sales:
Consumer Products......... $15,717 $15,304 $16,534
Aviation Services......... 7,456 7,866 8,920
------- ------- -------
Consolidated ........... $23,173 $23,170 $25,454
======= ======= =======
Earnings (loss) before
interest, other items
and intercompany charges:
Consumer Products......... $ 2,777 $ 2,546 $ 3,023
Aviation Services......... 656 364 81
------- ------- -------
Total Reportable Segments 3,433 2,910 3,104
Corporate and others...... (1,948) (1,731) (1,569)
Non-recurring charges..... (135) -- --
------- ------- -------
Consolidated ........... $ 1,350 $ 1,179 $ 1,535
======= ======= =======
Interest expense:
Consumer Products......... $ 206 $ 214 $ 236
Aviation Services......... 290 154 369
------- ------- -------
Total Reportable Segments 496 368 605
Corporate and others...... 149 155 157
------- ------- -------
Consolidated ........... $ 645 $ 523 $ 762
======= ======= =======
Depreciation and
amortization:
Consumer Products......... $ 234 $ 240 $ 219
Aviation Services......... 280 233 318
------- ------- -------
Total Reportable Segments 514 473 537
Corporate and others...... 18 17 14
------- ------- -------
Consolidated ........... $ 532 $ 490 $ 551
======= ======= =======
Year Ended December 31,
1998 1997 1996
---- ---- ----
Earnings (loss) from
continuing operations
before intercompany
charges and taxes:
Consumer Products......... $ 2,559 $ 2,339 $ 2,801
Aviation Services......... 395 217 (277)
------- ------- -------
Total Reportable Segments 2,954 2,556 2,524
Corporate and others...... (2,189) (2,007) (1,884)
Non-recurring charges..... (245) -- (434)
------- ------- -------
Consolidated ........... $ 520 $ 549 $ 206
======= ======= =======
Segment assets:
Consumer Products......... $ 5,254 $ 5,787 $ 5,306
Aviation Services......... 6,586 5,788 5,007
------- ------- -------
Total Reportable Segments 11,840 11,575 10,313
Corporate and others...... 797 498 607
Discontinued operations... 1,965 1,446 1,184
------- ------- -------
Consolidated ........... $14,602 $13,519 $12,104
======= ======= =======
Segment expenditures for
long-lived assets:
Consumer Products......... $ 134 $ 134 $ 619
Aviation Services......... 727 2,028 204
------- ------- -------
Total Reportable Segments 861 2,162 823
Corporate and others...... 12 2 42
------- ------- -------
Consolidated ........... $ 873 $ 2,164 $ 865
======= ======= =======
Geographic Information regarding the Company's net sales and long-lived
assets are as follows (in thousands):
Year Ended December 31,
1998 1997 1996
---- ---- ----
Net Sales (1):
United States..................... $21,448 $21,398 $23,803
Canada............................ 1,664 1,552 1,559
Other foreign countries........... 61 220 92
------- ------- -------
$23,173 $23,170 $25,454
======= ======= =======
December 31,
1998 1997
---- ----
Long-Lived Assets:
United States............................ $ 6,076 $ 5,719
Canada................................... 44 63
-------- --------
$ 6,120 $ 5,782
======== ========
(1) Net sales are attributed to countries based on location of customer.
The Company performs ongoing credit evaluations of its customers'
financial condition and generally requires no collateral from its customers.
For the years ended December 31, 1998, 1997 and 1996, net sales which
amounted to approximately $2,770,000, $2,337,000 and $3,624,000,
respectively, of Consolidated Net Sales were made by Ronson Consumer Products
to various units of one customer. No other customer accounted for more than
10% of Consolidated Net Sales for the years ended December 31, 1998, 1997 and
1996.
Note 13. COMPREHENSIVE INCOME:
Effective January 1, 1998, the Company adopted SFAS #130, "Reporting
Comprehensive Income". Comprehensive Income is the change in equity during a
period from transactions and other events from nonowner sources. Under SFAS
#130, the Company is required to classify items of other comprehensive income
in financial statements and to display the accumulated balance of other
comprehensive income (deficit) separately in the equity section of the
Consolidated Balance Sheets. The adoption of SFAS #130 does not have an
effect on the financial position or results of operations of the Company.
Changes in the components of Other Comprehensive Income (Loss)
and in Accumulated Other Comprehensive Deficit for 1998, 1997 and 1996 were
as follows (in thousands):
Foreign Currency Minimum Pension Accumulated Other
Translation Liability Comprehensive
Adjustment Adjustment Deficit
---------------- --------------- -----------------
Balance at
December 31, 1995.... $ (26) $(1,403) $(1,429)
Change during 1996... (10) (38) (48)
------ ------- -------
Balance at
December 31, 1996.... (36) (1,441) (1,477)
Change during 1997... (25) (104) (129)
------ ------- -------
Balance at
December 31, 1997.... (61) (1,545) (1,606)
Change during 1998... (35) 555 520
------ ------- -------
Balance at
December 31, 1998.... $ (96) $ (990) $(1,086)
====== ======= =======
Note 14. CONCENTRATIONS:
At December 31, 1998, a subsidiary of the Company had cash balances in a
bank which exceeded the insured limit by approximately $176,000.
Ronson Consumer Products currently purchases lighter products from
manufacturers in Spain and Peoples Republic of China. Since there are a
number of sources of similar lighter products, management believes that other
suppliers could provide lighters on comparable terms. A change of suppliers,
however, might cause a delay in delivery of the Company's lighter products
and, possibly, a short-term loss in sales which could have a short-term
adverse effect on operating results.
Note 15. RELATED PARTY TRANSACTIONS:
In October 1998 the Company entered into a consulting agreement
with Mr. Carl W. Dinger III, a 5% shareholder of the Company. The agreement
provides that Mr. Dinger will perform certain consulting services to the
Company for a period of 18 months at a fee of $4,500 per month. During the
year ended December 31, 1998, Mr. Dinger was compensated $13,500 under the
agreement.
In October 1998 Mr. Dinger granted an option to the Company to
purchase the 186,666 shares of the Company's common stock held by Mr. Dinger.
The option is for a period of 18 months, and the exercise price of the option
is $5.25 per share. The cost of the option is $5,500 per month for the period
of the option or until exercised. The Company incurred a cost of $16,500
during the year ended December 31, 1998, which was charged to Additional
Paid-in Capital. As part of the option agreement, Mr. Dinger has granted the
Board of Directors of the Company an irrevocable proxy to vote the optioned
shares during the time of the option.
The Company incurred costs for consulting services under
agreements with two directors of the Company of $100,000, $112,000 and
$72,000 in the years ended December 31, 1998, 1997 and 1996, respectively.
The Company incurred costs of $47,000, $51,000 and $104,000 in the years
ended December 31, 1998, 1997 and 1996, respectively, for legal fees to a
firm having a member who is also a director and an officer of the Company,
with these fees primarily related to the Prometcor environmental matters.