-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HvIXzgWcnj7WJrH3mwM+80B9MzPxiyLruG9M/glGydT0aKXNPxtZVB+TJgKXvItu gvPv+Z1G1cu5Ik2rXfLk0g== 0000914317-02-000291.txt : 20020415 0000914317-02-000291.hdr.sgml : 20020415 ACCESSION NUMBER: 0000914317-02-000291 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RONSON CORP CENTRAL INDEX KEY: 0000084919 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS CHEMICAL PRODUCTS [2890] IRS NUMBER: 220743290 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-01031 FILM NUMBER: 02591509 BUSINESS ADDRESS: STREET 1: CORPORATE PARK III CAMPUS DR STREET 2: PO BOX 6707 CITY: SOMERSET STATE: NJ ZIP: 08875-6707 BUSINESS PHONE: 7324698300 FORMER COMPANY: FORMER CONFORMED NAME: ART METAL WORKS INC DATE OF NAME CHANGE: 19680429 10-K 1 form10k-42826_32302.txt U.S. 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, 2001 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 ------------------------------------------------------ (Exact name of registrant as specified in its charter) NEW JERSEY 22-0743290 ------------------------ ------------------------------------ (State of incorporation) (I.R.S. Employer Identification No.) CAMPUS DRIVE, P.O. BOX 6707, SOMERSET, N.J. 08875 ------------------------------------------- ---------- (Address of principal executive office) (Zip Code) Registrant's telephone number: (732) 469-8300 Securities registered pursuant to Section 12(g) of the Act: Name of each exchange Title of each class on which registered ---------------------- ---------------------- 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 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 __ Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. [ X ] The aggregate market value of common equity held by non-affiliates of the registrant was $3,100,000 as of February 28, 2002, computed by reference to the average bid and asked price of such common equity. As of February 28, 2002, there were 3,456,457 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. 7A. Quantitive and Qualitative Disclosures about Market Risk. 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 Registrant. 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 - DESCRIPTION OF BUSINESS -------------------------------- (a) General Development of Business. The Registrant, Ronson Corporation (the "Company"), is a company incorporated in 1928. The Company is engaged principally in the following businesses: 1. Consumer Products; and 2. Aviation-Fixed Wing Operations and Services and Helicopter Services. The Company's common shares are listed on the Nasdaq SmallCap Market, and the Company's preferred shares are listed on the NASD Over-the-Counter ("OTC") Bulletin Board. The Company's common shares are quoted under the symbol RONC and its preferred shares are quoted under the symbol RONCP. 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 completed termination of its United States Nuclear Regulatory Commission ("NRC") license. Compliance with ISRA and NRC requirements has continued through 2001 and into 2002. In March 2002 Prometcor received a "No Further Action" ("NFA") letter from the New Jersey Department of Environmental Protection ("NJDEP") for all areas of concern (except groundwater) releasing the property. (See Environmental Matters below and Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations.) (b) Financial Information about Segments Refer to Note 12 of the Notes to Consolidated Financial Statements below. (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 2001 and 2000 accounted for 10% of Consolidated Net Sales of the Company and 18% of Net Sales of the segment, most of which were to WalMart's 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 four lighter products - the "RONII" refillable butane lighter; the Ronson "WINDII" liquid fuel windproof lighter; the Ronson "Varaflame Ignitor", used for lighting fireplaces, barbecues, camping stoves and candles; and the "EURO LITE" blue point flame butane lighter, excellent for pipes and cigars. 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 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 as well as much lower priced unbranded imports from China and other Far Eastern countries. In 1997 Ronson Consumer Products introduced a new lighter product, the Ronson 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 another nationally distributed brand and from unbranded imports. The Ronson WINDII lighter and Varaflame Ignitor are manufactured in China, both in accordance with the engineering and quality 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. The Varaflame Ignitor encounters strong competition from imported disposable and refillable ignitors. In late 1999 Ronson Consumer Products introduced the new EURO LITE blue point flame butane lighter, in both the United States and Canada. The EURO LITE uses Ronson Multi-Fill butane fuel injectors. It is manufactured in China in accordance with the Company's engineering and quality specifications. The EURO LITE faces strong competition from other nationally distributed brands and unbranded imports. During 2001 the Company developed a refillable ignitor called the Ronson AmeroFlame Ignitor. The AmeroFlame Ignitor has a patented child resistant/adult friendly mechanism. Its design includes a unique see-through refillable fuel tank and is fueled by Ronson Multi-Fill butane to light barbecues, fireplaces, candles, lanterns and has many other uses. It is packaged and is sold as a single ignitor or in kit form with a 26 gram Ronson Multi-Fill Butane. In the first half of 2002, the AmeroFlame Ignitor is replacing the Varaflame Ignitor. (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-Description of Properties, (3) Trenton, New Jersey). In its passenger and cargo services, Ronson Aviation operates a Citation II Jet airplane 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, 2001, Ronson Aviation had orders to purchase two new aircraft from Raytheon Aircraft Corporation, both of which are for resale. The total sales value of these aircraft is approximately $1,780,000. 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 New Jersey's "ISRA" law, operators of particular facilities classified as industrial establishments are required to ensure that their facility complies with environmental laws, including implementation of remedial action, if necessary, before selling or closing a facility. 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 NJDEP as to its NJDEP related environmental compliance activities respecting its Newark facility. As the result of sampling and the 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 undertaken and will be continuing in this area of the property. The Company's plan to resolve the groundwater issue has not yet been approved by the NJDEP. The Company expects that long-term monitoring of groundwater will be required. The full extent of the remaining costs related to groundwater is not determinable until all testing and remediation have been completed and accepted by the NJDEP. In May 2001 Prometcor received termination of the NRC license held by Prometcor. This action was taken by the NRC at Prometcor's request following Prometcor's compliance with applicable requirements. In March 2002 Prometcor received an NFA letter from the NJDEP for all areas of concern (except groundwater). With this NRC termination and the NJDEP NFA letter, the NRC and NJDEP released the Prometcor property. In October 2000 Ronson Aviation completed installation and initial testing of monitoring wells in the area where Ronson Aviation had removed and abandoned in place its former fuel tanks. Ronson Aviation's environmental advisors believe that the preliminary results of the testing indicate that no further testing should be required. The final extent of costs cannot be determined until the results of testing have been completed and accepted by the NJDEP. Therefore, the amount of additional costs, if any, cannot be fully determined at this time, but management believes that the effect will not be material. The Company believes that compliance with environmental laws and regulations will not have a material effect upon the Company's future capital expenditures 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 $227,000, $288,000 and $232,000 during the fiscal years ended December 31, 2001, 2000 and 1999, 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, 2001, the Company and its subsidiaries employed a total of 113 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 -------- ------------ 2001 55% 45% 2000 57% 43% 1999 65% 35% (d) Financial Information About Geographic Areas Refer to Note 12 of the Notes to Consolidated Financial Statements. Item 2 - DESCRIPTION OF PROPERTIES ---------------------------------- The following list sets forth the location and certain other information concerning the Company's 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. 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. 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. (1) Woodbridge, New Jersey Facilities included in (a) and (b) below are owned subject to first and second mortgages in favor of Fleet Capital Corporation. (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) Somerset, New Jersey One small facility for executive and consumer products offices. This facility is subject to a lease which expires in June 2006. The facility is constructed of metal, cinder block and cement. (3) 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. (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 3 (a) above. (4) 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 2006. This facility is constructed of brick and cinder block. (5) Newark, New Jersey One parcel of vacant land. Operations of these facilities have terminated. The Company has entered into a contract for the sale of the parcel upon completion of environmental clearance. 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. RONSON CORPORATION v. THE HOME INDEMNITY COMPANY, ET AL ------------------------------------------------------- In the third quarter of 1999, the Company filed a lawsuit in the Superior Court of New Jersey Law Division : Essex County against a number of its former general liability insurance carriers seeking recovery for environmental investigation and remediation costs incurred and anticipated at various locations, primarily Prometcor. In 2000 and 2001 the Company reached agreement with most of the carriers totalling approximately $1,200,000. In March 2002 the Company reached settlement with the final insurance carrier in the amount of $600,000. (Refer to Notes 2 and 16 of the Notes to Consolidated Financial Statements.) 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. The Company and the USEPA settled the matter in the fourth quarter of 2001. The settlement did not have a material effect on the Company's financial condition or results of operations. Gary & Margaret Minnich vs. Ronson Consumer Products Corporation and -------------------------------------------------------------------- Walmart Stores East, Inc. ------------------------- In March 2002 Ronson Consumer Products Corporation was advised that it is the Defendant in a product liability lawsuit pending in the Circuit Court for Washington County, Maryland, in which Plaintiffs seek damages for an incident that allegedly occurred in February 1999, when a cigarette lighter allegedly distributed by the Company allegedly ignited the clothing of Gary Minnich. The case was filed in February 2002. The Plaintiffs seek substantial damages and discovery has not begun. Claimants have not submitted any information or evidence in support of any aspect of their claim. Management believes that the claim is without merit and a loss, if any, would be well within the limits of insurance coverage. Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ------------------------------------------------------------ (a) At the Company's Annual Stockholders' Meeting (the "Meeting") on November 27, 2001, the matters set forth in the Company's 2001 Notice of Meeting and Proxy Statement, which is incorporated herein by reference, were submitted to the Company's stockholders. (b) Messrs. Robert A. Aronson, Erwin M. Ganz and Justin P. Walder were elected as Class II directors for three-year terms by 85.4% or more of the votes cast at the Meeting. (c) The adoption of the Ronson Corporation 2001 Incentive Stock Option Plan was approved by 84.6% of the votes cast at the Meeting. (d) The appointment of Demetrius & Company, L.L.C., independent auditors, to audit the consolidated financial statements of the Company for the year 2001 was ratified by 88.9% of the votes cast at the Meeting. The number of affirmative votes, negative votes and abstentions on each matter is set forth in the Report of Inspectors of Election, a copy of which is attached hereto as Exhibit 99(a). 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. 2001 -------------------------------------------------- Quarter 1st 2nd 3rd 4th -------------------------------------------------- High Bid $2.06 $1.88 $1.60 $1.76 Low Bid $1.38 $1.04 $ .90 $1.05 2000 -------------------------------------------------- Quarter 1st 2nd 3rd 4th -------------------------------------------------- High Bid $2.50 $2.50 $2.13 $2.06 Low Bid $1.88 $1.94 $2.00 $1.06 b) At February 28, 2002, there were 2,409 stockholders of record of the Company's common stock. c) No dividends were declared or paid on the Company's common stock in the two years ended December 31, 2001. Item 6 - SELECTED FINANCIAL DATA -------------------------------- The information required by this Item is filed with this report on page 32 and is incorporated herein by reference. Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION -------------------------------------------------------------------- AND RESULTS OF OPERATIONS ------------------------- RESULTS OF OPERATIONS --------------------- 2001 Compared to 2000 The Company's Net Earnings in 2001, after non-recurring items, were $531,000, an increase of 22% from $434,000 in 2000. The Company's Net Sales increased by 4% to $29,020,000 in 2001 compared to $28,008,000 in 2000. The Net Sales in 2001 included sales of $1,350,000 for two charter aircraft at Ronson Aviation. The Company's Earnings from Continuing Operations before Interest, Other Items, and Non-recurring Items were $1,733,000 in the year 2001, an increase of $285,000 or 20%, over $1,448,000 in the year 2000. The Company's Earnings from Continuing Operations before Income Taxes and Non-recurring Items increased to $1,088,000 in the year 2001 from $568,000 in 2000, an increase of 92%. Ronson Consumer Products ------------------------ (in thousands) Year Ended December 31, 2001 2000 ---- ---- Net sales $ 16,024 $ 16,081 Earnings before interest, other items, intercompany charges, and taxes 1,952 1,967 Earnings before intercompany charges and taxes 1,755 1,696 Net Sales of consumer products at Ronson Consumer Products were nearly unchanged in 2001 compared to 2000. Cost of Sales, as a percentage of Net Sales, at Ronson Consumer Products was unchanged at 54% in 2001 and in 2000. Selling, Shipping and Advertising Expenses and General and Administrative Expenses, as a percentage of Net Sales, were slightly lower at 32% in 2001 from 33% in 2000. Interest Expense at Ronson Consumer Products decreased by $77,000 to $172,000 in 2001 from 2000 due to decreases in the prime rate of interest and to lower average debt levels. Ronson Aviation --------------- (in thousands) Year Ended December 31, 2001 2000 ---- ---- Net sales $ 12,996 $ 11,927 Earnings before interest, other items, intercompany charges, and taxes 1,518 928 Earnings before intercompany charges and taxes 1,316 587 Non-recurring income (loss) (232) 110 Net Sales at Ronson Aviation increased by 9% in 2001 from 2000, primarily due to increased fuel sales and sales of $1,350,000 for two turbo prop C-99 charter aircraft, offset by decreases in sales of other aircraft and of C-99 charter services. The sale of the two C-99 aircraft reduced the Company's long-term debt by $704,000 and fixed assets by $1,490,000 and improved its working capital by about $720,000. The increased sales of aviation fuel in 2001 were due primarily to increased fuel volume sold. Ronson Aviation's Cost of Sales, as a percentage of Net Sales, decreased to 77% in 2001 as compared to 81% in 2000. The decrease in the Cost of Sales percentage in 2001 was primarily due to the change in mix of products sold. Ronson Aviation's Selling, Shipping and Advertising Expenses and General and Administrative Expenses, as a percentage of Net Sales, were unchanged at 8% in 2001 and 2000. The non-recurring item in 2001 relates to the sale of Ronson Aviation's two turbo prop C-99 charter aircraft and the related reduction in personnel. Sales in the year 2001 included the proceeds of $1,350,000 from the sale of the two charter aircraft. The 2001 Non-recurring Loss of $232,000 consisted of a loss on the two C-99 aircraft sales of $140,000 and the related costs of $92,000. The Company will continue to operate its Citation II Jet in its charter operations. Other than costs related to ceasing use of the two C-99 aircraft and the aircraft sales in the fourth quarter of 2001, management does not expect a material effect on the Company's future results of operations. Interest Expense at Ronson Aviation decreased by $131,000 to $198,000 in 2001 due to decreases in the prime rate of interest and to reduced debt. Other Items ----------- The General and Administrative Expenses of Corporate and Others were higher in 2001 as compared to 2000 primarily due to higher pension expense as the result of increased amortization related to pension asset reductions in 2000. 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, 2001 2000 1999 ---- ---- ---- Insurance recovery income $ 175 $ 645 $ -- Discontinuance costs accrued 175 645 763 ------ ------- ------- -- -- 763 Deferred income tax benefits -- -- (277) ------ ------- ------- Loss from discontinued operations $ -- $ -- $ 486 ====== ======= ======= In 1990 the Company discontinued the operations of its wholly owned subsidiary, Ronson Metals Corporation, subsequently renamed Prometcor, Inc. ("Prometcor"). Upon the cessation of operations in 1990, 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 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. In 2001 and to date in 2002, Prometcor made substantial progress in the environmental clearance of its property in Newark, N.J. In May 2001 the NRC released the last remaining parcel for unrestricted use. A similar release of this parcel was received from the NJDEP in March 2002. Prometcor's manufacturing buildings had stood on this site. The sale of this final parcel of the property will be closed under the existing sales contract for about $295,000. The sale of the property is expected to proceed in the next few months with the Company retaining responsibility for the groundwater-related activities. The Company's plan to resolve groundwater issues has not yet been approved by the NJDEP. Further testing completed in 2000 resulted in increased estimates of the range of costs to be incurred. These costs will be incurred over an extended number of years. In calculating and accruing these costs, the Company has discounted the costs to the present value. While making this progress to complete clearance of the property, Prometcor incurred greater than anticipated costs primarily due to the greater quantity of soil removed and disposed of at a licensed disposal facility, and an extended period of time to satisfy all regulatory requirements. Due to the increased costs incurred and anticipated, Prometcor accrued additional costs of $175,000 in the fourth quarter of 2001, offset by the insurance recovery income. Since the termination of Prometcor's business operations in 1990, the total costs and expenses related to discontinued operations less the expected gain from the eventual sale of Prometcor's assets, have been estimated, based on the latest available information, to be about $7,350,000. 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 2001. The liability for these estimated costs and expenses as recorded in the financial statements at December 31, 2001, was based, in accordance with normal accounting practices, on the lower limit of the range of costs as projected by the Company and its consultants. The estimated upper limit of the range of costs is approximately $600,000 above the lower limit. The full extent of the costs and time required for completion of the NJDEP environmental clearance is not determinable until the remediation and confirmatory testing of the properties have been completed and accepted by the NJDEP. In the second half of 1999, the Company filed a lawsuit against twelve of its former general liability insurance carriers seeking recovery of environmental investigation and remediation costs incurred and anticipated at various locations, primarily Prometcor. In 2000 and 2001 the Company reached settlement agreements with eleven of the twelve insurance carriers involved. These settlements totalled approximately $1,230,000. Based on the settlements in 2001 and 2000, in the fourth quarter of 2001, Prometcor recognized insurance recovery income in the amount of about $175,000, net of related costs. On March 6, 2002, the Company reached a settlement with the last remaining insurance company in the above matter. This last settlement was in the amount of $600,000. After related costs, the Company expects to recognize Income From Discontinued Operations in the first quarter of 2002 of $285,000 before income taxes and $170,000 after income taxes due to this settlement. 2000 Compared to 1999 The Company's Net Sales increased in 2000 by 13% to $28,008,000 from $24,696,000 in 1999. The Company's Earnings from Continuing Operations before Interest and Other Items increased to $1,558,000 in 2000 as compared to $1,198,000 in 1999, an increase of $360,000 or 30%. The Company's Earnings from Continuing Operations before Income Taxes also increased substantially in 2000 to $678,000, an increase of 74% from $390,000 in 1999. The Company's Net Earnings of $434,000 in the year 2000 increased by over $600,000 compared with the Net Loss of $194,000 in 1999, which included a loss of $486,000 from Prometcor's discontinued operations. Ronson Consumer Products ------------------------ (in thousands) Year Ended December 31, 2000 1999 ---- ---- Net sales $ 16,081 $ 16,096 Earnings before interest, other items, intercompany charges, and taxes 1,967 2,557 Earnings before intercompany charges and taxes 1,696 2,326 Non-recurring charges -- (187) Net Sales of consumer products at Ronson Consumer Products were unchanged in 2000 compared to 1999. Cost of Sales, as a percentage of Net Sales, at Ronson Consumer Products increased to 54% in 2000 compared to 51% in 1999 primarily due to increases in 2000 in the cost of materials primarily related to the Company's Ronsonol fuel and Multi-Fill butane products due to rising oil prices, in research and development, and in costs related to the ignitor utility lighter. Selling, Shipping and Advertising Expenses and General and Administrative Expenses, as a percentage of Net Sales, increased slightly to 33% in 2000 from 32% in 1999 primarily due to increases in selling expenses in 2000. The non-recurring charge of $187,000 in 1999 was the adverse effect of the voluntary short-term withdrawal of the ignitor from the Canadian market in 1999. Interest Expense at Ronson Consumer Products increased by $43,000 to $249,000 in 2000 primarily due to increases in the prime rate. Ronson Aviation --------------- (in thousands) Year Ended December 31, 2000 1999 ---- ---- Net sales $ 11,927 $ 8,600 Earnings before interest, other items, intercompany charges, and taxes 928 398 Earnings before intercompany charges and taxes 587 52 Non-recurring income 110 -- Net Sales at Ronson Aviation increased by 39% in 2000 from 1999, primarily due to increased aircraft sales, increased fuel sales, and increased sales of charter services. The increased sales of aviation fuel in 2000 was due both to increased fuel volume sold and to higher fuel selling prices. Ronson Aviation's Cost of Sales, as a percentage of Net Sales, increased to 81% in 2000 as compared to 80% in 1999. The increase in the Cost of Sales percentage in 2000 was primarily due to the change in mix of products sold and to higher fuel costs. Ronson Aviation's Selling, Shipping and Advertising Expenses and General and Administrative Expenses, as a percentage of Net Sales, were reduced to 8% in 2000 from 11% in 1999 primarily due to the increased sales in 2000. The non-recurring income of $110,000 at Ronson Aviation in 2000 was due to settlement of an insurance claim related to a 1998 fuel spill. In the third quarter of 2000, Ronson Aviation settled the claim for about $144,000 and recorded income of $110,000, net of related costs. In 1998 Ronson Aviation had recognized costs of $135,000 related to the third quarter 1998 fuel spill. Other Items ----------- The General and Administrative Expenses of Corporate and Others were reduced in 2000 primarily due to lower legal expenses. The Income Tax Provisions (Benefits)-Net increased by $146,000 from 1999 to 2000 primarily due to the Company's increased usage of prior net operating loss carryforwards in 2000. Discontinued Operations ----------------------- In 2000 Prometcor made substantial progress in the environmental clearance of its property in Newark, N.J. In February 2000 the NRC released one of the two remaining parcels for unrestricted use. A similar release of this parcel for unrestricted use was received from the NJDEP in August 2000. This parcel was sold under an existing sales contract for about $200,000. In the fourth quarter of 2000 and January 2001, all remaining radiologically contaminated soil was excavated and sent to a licensed disposal site. In addition, the plan relating to non-radiological cleanup and clearance of the soil was approved by the NJDEP. While making this progress to complete clearance of the property, Prometcor incurred greater than anticipated costs primarily due to the greater quantities of soil removed and disposed of at a licensed disposal facility, increased estimates of future groundwater-related activities, and the extended period of time to complete clearance. Because of these increases in costs incurred and anticipated, Prometcor took additional accruals of $645,000 in 2000. INCOME TAXES In accordance with Statement of Financial Accounting Standards ("SFAS") #109, "Accounting for Income Taxes", in 2001, 2000 and 1999 the Company recognized deferred income tax expenses of $320,000, $236,000, and $53,000, respectively, related to continuing operations primarily due to the Earnings from Continuing Operations before Taxes. The Company recognized deferred income tax benefits related to discontinued operations of $277,000 in 1999 as the result of the accruals of costs related to the discontinued operations. Current income taxes in the years ended December 31, 2001 and 2000, of $322,000 and $375,000, respectively, were presented net of credits arising from the utilization of available tax losses and loss carryforwards in accordance with SFAS #109. In 2001, 2000, and 1999, current income tax expenses were as follows (in thousands): Year Ended December 31, 2001 2000 1999 ---- ---- ---- Federal $ 5 $ -- $ -- State (11) 8 45 Foreign 11 -- -- ---- ---- ---- Total $ 5 $ 8 $ 45 ==== ==== ==== At December 31, 2001, the Company had net operating loss carryforwards for federal income tax purposes of approximately $4,350,000 and alternative minimum tax credit carryforwards of $75,000. (Refer to Note 3 of the Notes to Consolidated Financial Statements.) FINANCIAL CONDITION ------------------- The Company's working capital was increased substantially to $233,000 at December 31, 2001, as compared to a deficiency in working capital of $1,147,000 at December 31, 2000. The improvement of $1,380,000 in working capital in 2001 was primarily due to the Company's Net Earnings and $720,000 from the sale of two charter aircraft by Ronson Aviation described in more detail above. The Company's Stockholders' Equity was $2,872,000 at December 31, 2001, compared to $2,898,000 at December 31, 2000. The small change in 2001 Stockholders' Equity was primarily due to the Net Earnings in 2001 of $531,000, substantially offset by a loss, net of related income tax benefits, in the Minimum Pension Liability Adjustment component of Accumulated Other Comprehensive Loss. This loss consisted of a loss on the pension plan assets, an actuarial loss related to plan benefit experience, and a loss due to a lower interest rate. The Company's cash balances increased substantially in 2001 to $689,000 from $81,000 in 2000, and the Company's short-term debt decreased to $858,000 in 2001 from $1,697,000 in 2000. These improvements were both primarily due to the Net Earnings in 2001, the sales by Ronson Aviation of the two charter aircraft and the proceeds from the insurance settlements related to the Prometcor groundwater costs. The Increase in Cash from Changes in Inventories of $1,762,000 in 2001 was primarily due to the sale of the two C-99 charter aircraft by Ronson Aviation, for a total of $1,350,000. The aircraft had been transferred to inventory from fixed assets at the book value of $1,490,000. In 2000 the Increase in Cash from Changes in Inventories and the Payments of Short-Term Debt were primarily due to a decrease in aircraft inventory at Ronson Aviation of $1,854,000. The Ronson Aviation aircraft inventory had increased in the fourth quarter of 1999, and the increase was financed with short-term debt. Accounts payable were reduced by $574,000 to $1,593,000 at December 31, 2001, primarily due to the timing of purchases and payments and to the usage of a portion of the proceeds from the sale of two Ronson Aviation charter aircraft discussed above. The Payments of Long-Term Debt in 2001 were $1,139,000 as compared to $440,000 in 2000 primarily because $704,000 of the proceeds from the sales of the two Ronson Aviation charter aircraft was utilized to pay the loans financing the aircraft. Based on the amount of the loans outstanding and the levels of accounts receivable and inventory at December 31, 2001, Ronson Consumer Products had unused borrowings available at December 31, 2001, of about $718,000 under the Fleet Capital Corporation ("Fleet") and Canadian Imperial Bank of Commerce lines of credit. Based on the level of accounts receivable, Ronson Aviation had unused borrowings of about $247,000 under the Fleet line of credit at December 31, 2001. The decrease in Current Assets of Discontinued Operations in 2001 was primarily due to the collection of receivables for the insurance recovery discussed above. The decrease in Current Liabilities of Discontinued Operations in 2001 was primarily due to the use of insurance proceeds to pay for costs previously accrued as substantial progress was made in completing environmental clearance of the Prometcor property. This was partially offset by the accrual of $175,000 of additional expected environmental costs at Prometcor, as described above. In the third quarter of 2001, the Company settled for $100,000 a Superfund Site matter with the United States Environmental Protection Agency ("USEPA"). In September 1998 the Company received a "de minimis" settlement offer ("Settlement Offer") from the 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"). 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 for waste disposed of prior to 1980 at a landfill at the Site. The matter was settled in September 2001, and the settlement did not have a material effect on the Company's results of operations or financial condition. 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, current and future borrowing availability under established external financial arrangements, potential additional sources of financing and existing cash balances. The Company's revolving lines of credit between Fleet, RCPC and Ronson Aviation are due to expire on June 30, 2002. The Company is currently involved in discussions with Fleet to extend the lines of credit. Management expects to extend the lines of credit for at least an additional two years on terms comparable to or more favorable than are included in the current loan agreements. The Company's capital commitments including long-term debt and leases are discussed more fully in Notes 5 and 6 of the Notes to Consolidated Financial Statements. A summary of the maturities of contractual obligations and other commitments is as follows (in thousands): Payments Due by Period --------------------------------------------------- Contractual Less than 2-3 4-5 After Obligations Total 1 year years years 5 years ----------- ----- ------ ----- ----- ------- Long-term debt 3,003 347 2,544 56 56 Capital lease obligations 126 41 74 11 -- Operating leases 1,213 315 539 359 -- Other long-term obligations (1) 2,471 929 1,542 -- -- ----- ----- ----- ----- ----- Total contractual obligations 6,813 1,632 4,699 426 56 ===== ===== ===== ===== ===== Pension obliga- tions (2) 7 1,751 571 (2) ===== ===== ===== (1) Other long-term obligations include amounts due under employment agreements, a consulting agreement and a stock option agreement. (2) The payments of pension obligations assume necessary required contributions are made annually and that the plan incurs no actuarial or asset gains or losses. Any actuarial gains and losses cannot be estimated at this time. An estimate of the pension obligations beyond five years is not possible. Other commercial commitments include outstanding letters of credit of $49,000 for the importation of consumer products and of a $60,000 standby letter of credit related to Ronson Aviation aircraft on order from Raytheon Aircraft Corporation. The Company has no off-balance sheet financing arrangements other than the operating leases discussed above, no guarantees of the obligations of others, and no unconsolidated subsidiaries or special purpose entities. RECENT ACCOUNTING PRONOUNCEMENTS In June 2001 the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". These Statements become effective for the Company on January 1, 2002. In addition, in June 2001 the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations", effective for years beginning after June 15, 2002, and in August 2001 SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets", effective for years beginning after December 15, 2001. Management has reviewed the Statements and does not believe the Statements will have a material effect on the Company's financial position or results of operations. FORWARD-LOOKING STATEMENTS This Management's Discussion and Analysis of Operations and other sections of this report contain forward-looking statements that anticipate results based on management's plans that are subject to uncertainty. The use of the words "expects", "plans", "anticipates" and other similar words in conjunction with discussions of future operations of 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 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK -------------------------------------------------------------------- The Company is exposed to changes in prevailing market interest rates affecting the return on its investments, but does not consider this interest rate market risk exposure to be material to its financial condition or results of operations. The Company invests primarily in highly liquid debt instruments with strong credit ratings and very short-term (less than 90 days) maturities. The carrying amount of these investments approximates fair value. All of the Company's short-term debt carries a variable rate of interest, and, therefore, the carrying value of the short-term debt approximates fair value. The Company's outstanding long-term debt as of December 31, 2001, consisted of indebtedness in the amount of $1,229,000 with a variable rate of interest and $1,774,000 with a fixed rate of interest which is not subject to change based upon changes in prevailing market interest rates. Under its current policies, the Company does not use derivative financial instruments, derivative commodity instruments or other financial instruments to manage its exposure to changes in interest rates, foreign currency exchange rates, commodity prices or equity prices. 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, 2001, 2000, and 1999. PART III -------- Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY, COMPLIANCE --------------------------------------------------------------------- WITH SECTION 16(a) OF THE EXCHANGE ACT -------------------------------------- (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 79 1952- 2002 President & Chief Present Executive Officer; Chairman of Executive Committee; Member of Nominating Committee. Robert A. Aronson 52 1993- 2004 Member of Audit Committee Present through March 14, 2002; Managing Member of Independence Leather, L.L.C., Mountainside, NJ, the principal business of which is the import of leather products, 1996 to present; son of the President & Chief Executive Officer of the Company. Erwin M. Ganz 72 1976- 2004 Member of Executive Present 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. I. Leo Motiuk 56 December 2002 Member of Audit Committee 1999 - beginning March 14, 2002; Present Attorney; Former partner in Shanley Fisher, P.C., Attorneys at Law, Morris- town, NJ.
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) ---------------- --- -------- ------- ---------------- Gerard J. Quinnan 73 1996- 2003 Member of Audit Committee; Present Consultant for the Company, 1990 to present; Vice President-General Manager of Ronson Consumer Products Corporation, 1981 to 1990. Justin P. Walder 66 1972- 2004 Secretary; Assistant Cor- Present poration Counsel; Member of Executive Committee and Nominating Committee; Principal in Walder, Hayden & Brogan, P.A., Attorneys at Law, Roseland, NJ. Saul H. Weisman 76 1978- 2003 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.
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, 2004: Positions and Offices Period Served with Company; Name Age as Officer Family Relationships ---- --- ---------- -------------------- Louis V. Aronson II 79 1953- President & Chief Executive Present Officer; Chairman of Executive Committee; Director. Daryl K. Holcomb 51 1996- Vice President & Chief Financial Present Officer, Controller & Treasurer. 1993-1996 Chief Financial Officer, Controller & Treasurer; 1988-1993 Controller & Treasurer; None. Justin P. Walder 66 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, Hayden & 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, 2001, 2000, and 1999, for the Chief Executive Officer and the other executive officer of the Company whose 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 2001 $606,119 $59,755 22,500 $14,305 President & Chief 2000 566,466 47,990 -- 13,150 Executive Officer 1999 529,408 42,484 7,500 12,950 Daryl K. Holcomb 2001 155,500 21,234 10,000 3,400 Vice President & 2000 148,500 17,293 -- 3,266 Chief Financial 1999 138,500 14,800 4,500 3,119 Officer, Controller and 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 2001 All Other Compensation included matching credits by the Company under its Employees' Savings Plan (Mr. L.V. Aronson, $3,400; Mr. Holcomb, $3,400;) and the cost of term life insurance included in split-dollar life insurance policies (Mr. L.V. Aronson, $10,905). OPTION GRANTS IN LAST FISCAL YEAR --------------------------------- Potential Realizable Value of Assumed Annual Rates of Stock Price Number of Percent of Appreciation for Securities Total Options Options Term Underlying Granted to Exercise ------------ Options Employees in Price Exp. Name Granted Fiscal Year ($/sh) Date 5% 10% ---- ------- ----------- ------ ---- -- --- L.V. Aronson II 22,500 36% $ 1.33 7/6/06 $4,822 $13,921 D.K. Holcomb 10,000 16% 1.21 7/6/06 3,343 7,387 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, 2001. "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 Number of In-the-Money Number of Unexercised Options Options at Shares at FY-End (5) FY-End (4) Acquired ------------- ---------- on Value (1) Exercis- Unexercis- Exercis- Unexercis- Name Exercise Realized able (2) able (3) able able ---- -------- -------- -------- -------- ---- ---- L.V. Aronson II -- $ -- 7,500 22,500 $ -- $ 10,575 D.K. Holcomb -- -- 4,500 10,000 -- 5,900 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 exercisable options held by the named executive officers at December 31, 2001, are exercisable at any time and expire on December 7, 2004. (3) The unexercisable options held by the named executive officers at December 31, 2001, are exercisable at any time after January 6, 2002, and expire on July 6, 2006. (4) 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, 2001, to the option prices. (5) The exercise prices of the options held at December 31, 2001, were as follows: Number Exercise Price ------ -------------- L.V. Aronson II 7,500 $ 2.68125 22,500 1.33 D.K. Holcomb 4,500 2.4375 10,000 1.21 LONG-TERM INCENTIVE PLANS None. 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. Mr. Ganz has a consulting agreement with the Company for the period ending December 31, 2002, which is cancellable at any time by either party with 180 days notice and provides compensation at the annual rate of $87,500 plus participation in the Company's health and life insurance plans and the use of an automobile. In the year ended December 31, 2001, Mr. Ganz was compensated $87,500 for his services. Mr. Quinnan has a consulting agreement with the Company for the period ending December 31, 2003, 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 2001 Mr. Quinnan was compensated $45,375 for his services and was provided the use of an automobile. 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, December 17, 1998, and September 19, 2001, provides for a term expiring December 31, 2004. 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. 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. In February 2002 Mr. L.V. Aronson offered and accepted a 5% reduction in his base salary provided for by the terms of his employment contract. Previously, Mr. L.V. Aronson had offered and accepted other reductions in his base salary provided by the terms of his employment contract. 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, waived a 7% salary increase due January 1, 1991, under the terms of the contract. 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. 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 893,299 (1)(2) 25.6% (1)(2) Campus Drive P.O. Box 6707 Somerset, New Jersey 08875 Ronson Corporation Retirement Plan Common 171,300 (2) 5.0% (2) Campus Drive P.O. Box 6707 Somerset, New Jersey 08875 Carl W. Dinger III Common 413,666 (3) 12.0% (3) 55 Loantaka Lane North Morristown, New Jersey 07960 Steel Partners II, L.P. Common 316,199 (4) 9.2% (4) 750 Lexington Avenue 27th Floor New York, New York 10022 Howard M. Lorber Common 269,340 (5) 7.8% (5) 70 East Sunrise Highway Valley Stream, New York 11581 (1) Includes 30,000 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 and Ganz. 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 1,064,599 shares, or 30.5% 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 200,942 shares, or 5.8% of the class. The Retirement Plan's holdings were reported in 1988 on Schedule 13G, as amended September 22, 1997. (3) 413,666 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 13 below). (4) 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. (5) 269,340 common shares owned directly by Mr. Lorber. This information was obtained from a Schedule 13D filed with the SEC on January 27, 2000, by Mr. Lorber. (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 893,299 (3) 25.6% Robert A. Aronson 6,995 (1) Erwin M. Ganz 29,642 (3) (1) I. Leo Motiuk 2,500 (1) Gerard J. Quinnan 3,500 (1) Justin P. Walder 50,003 1.4% Saul H. Weisman 15,343 (1) Daryl K. Holcomb 37,770 1.1% All Directors and Officers as a group (nine (9) individuals including those named above) 1,040,252 29.7% (1) Shares owned beneficially are less than 1% of total shares outstanding. (2) Shares listed as owned beneficially include 51,500 shares subject to option under the Ronson Corporation 1996 Incentive Stock Option Plan as follows: Common Shares Under Option ------------ Louis V. Aronson II 30,000 Justin P. Walder 7,000 Daryl K. Holcomb 14,500 All Directors and Officers as a group (nine (9) individuals including those named above) 51,500 (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 and Ganz. 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 1,064,599 shares, or 30.5% 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 200,942 shares, or 5.8% 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 -------------------------------------------------------- (a) Transactions with management and others. In October 1998 the Company entered into a consulting agreement with Mr. Carl W. Dinger III, a greater than 5% shareholder of the Company. The agreement provided that Mr. Dinger perform certain consulting services for the Company for a period of 18 months expiring on April 7, 2000. On March 6, 2000, the Company and Mr. Dinger entered into a new consulting agreement effective upon the expiration date of the original agreement. The new agreement provides that Mr. Dinger continue to perform consulting services for the Company for a period of 48 months at a fee of $7,000 per month. During the year ended December 31, 2001, Mr. Dinger was compensated $84,000 under the agreement. In October 1998 Mr. Dinger granted an option to the Company to purchase the 186,166 shares of the Company's common stock held by Mr. Dinger. The option was for a period of 18 months expiring on April 7, 2000, and the exercise price of the option was $5.25 per share. On March 6, 2000, Mr. Dinger granted a new option to the Company, to purchase the 413,666 shares of the Company's common stock now held by Mr. Dinger. The option is for a period of 48 months. The exercise price of the option is $5.25 per share for the first two years, and the option price in the second two year period is $7.50 per share. The cost of the option is $4,000 per month for the period of the option or until exercised. As part of the new 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. In March 2000 Mr. Dinger purchased 227,500 shares of newly issued restricted common stock of the Company at the price of $2.50 per share. The Company incurred a cost for the option of $48,000 during the year ended December 31, 2001. (b) Certain business relationships. During the year ended December 31, 2001, the Company, Ronson Consumer Products, Ronson Aviation and Prometcor retained the firm of Walder, Hayden & 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. (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 Fleet Capital Corporation ("Fleet"), formerly Summit Bank, for a Revolving Loan and a Term Loan. On March 6, 1997, the Revolving Loan was amended and extended to June 30, 2000. On May 13, 1999, the Revolving Loan was further extended to June 30, 2002. 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). A July 1997 amendment was attached to the Company's September 30, 1997, Form 10-Q as Exhibit 10(g). The May 1999 amendment was attached to the Company's June 30, 1999, Form 10-Q as Exhibits 10(a) and 10(f). On December 1, 1995, the Company and RCPC entered into a mortgage loan agreement with Fleet. The agreement and note were attached to the Company's 1995 Form 10-K as Exhibits 10(a) and 10(b). On May 13, 1999, the Company and RCPC refinanced the existing mortgage. The new mortgage loan was attached to the Company's June 30, 1999, Form 10-Q as Exhibits 10(b)-10(e). On August 28, 1997, Ronson Aviation entered into an agreement with Fleet for a Revolving Loan and a Term Loan. On May 13, 1999, Ronson Aviation and Fleet extended the Revolving Loan and Term Loan to June 30, 2002. 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). The May 1999 amendment agreements were attached to the Company's June 30, 1999, Form 10-Q as Exhibits 10(g)-10(k). For further information on the 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, 2001, filed with this report pursuant to Item 7, 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, December 17, 1998, and September 19, 2001. 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 September 19, 2001, was attached to the Company's Form 8-K filed on October 23, 2001, as Exhibit 10. (20) Other documents or statements to security holders. The Ronson Corporation Notice of Meeting of Stockholders held on November 27, 2001, and Proxy Statement was filed on October 25, 2001, and is incorporated herein by reference. (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 four 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. (a) Report of Inspectors of Election from the Ronson Corporation Annual Meeting of Stockholders on November 27, 2001. (b) Reports on Form 8-K filed in the fourth quarter of 2001. On October 23, 2001, the Company filed a report on Form 8-K with the Securities and Exchange Commission providing information in response to Item 5 of such report. No financial statements or pro forma financial information was included in 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 28, 2002 By: /s/Louis V. Aronson II ---------------------- Louis V. Aronson II, President and Chief Executive Officer and Director Dated: March 28, 2002 By: /s/Daryl K. Holcomb ---------------------- Daryl K. Holcomb, Vice President & Chief Financial Officer, Controller and Treasurer Dated: March 28, 2002 By: /s/Justin P. Walder ---------------------- Justin P. Walder, Secretary and Director Dated: March 28, 2002 By: /s/Robert A. Aronson ---------------------- Robert A. Aronson, Director Dated: March 28, 2002 By: /s/Erwin M. Ganz ---------------------- Erwin M. Ganz, Director Dated: March 28, 2002 By: /s/I. Leo Motiuk ---------------------- I. Leo Motiuk, Director Dated: March 28, 2002 By: /s/Gerard J. Quinnan ---------------------- Gerard J. Quinnan, Director Dated: March 28, 2002 By: /s/Saul H. Weisman ---------------------- Saul H. Weisman, Director EX-13 3 exhibit13.txt ANNUAL REPORT ON FORM 10-K ITEM 8 FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2001 RONSON CORPORATION SOMERSET, NEW JERSEY RONSON COPPORATTOW FIVE-YEAR SELECTED FINANCIAL DATA - ----------------------------------------------------- Dollars in thousands (except per share data) 2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- Net sales $29,020 $28,008 $24,696 $23,173 $23,170 Earnings from continuing operations 531 434 292 660 783 Total assets 12,627 15,192 16,728 14,736 14,160 Long-term obligations 4,460 4,681 3,701 3,895 4,222 Per common share (1,2): Earnings from continuing operations: Basic 0.15 0.13 0.09 0.20 0.26 Diluted 0.15 0.13 0.09 0.20 0.25 (1) Basic Net Earnings per Common Share provides for quarterly cumulative preferred dividends with no conversion of preferred shares to common shares. Diluted Net Earnings per Common Share assumes no provision for the quarterly cumulative preferred dividends with full conversion of all preferred shares to common shares and includes the dilutive effect of outstanding stock options.The assumed conversion of preferred to common and the stock options were anti-dilutive for the years ended December 31, 2001, 2000, 1999 and 1998, and, therefore, were excluded from the computation of Diluted Net Earnings Per Common Share for those years. (2) No dividends on common stock were declared or paid during the five years ended December 31, 2001. RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES LIST OF FINANCIAL STATEMENTS The following consolidated financial statements of Ronson Corporation and its wholly owned subsidiaries are included in Item 8: Consolidated Balance Sheets - December 31, 2001 and 2000 Consolidated Statements of Operations - Years Ended December 31, 2001, 2000 and 1999 Consolidated Statements of Changes in Stockholders' Equity - Years Ended December 31, 2001, 2000 and 1999 Consolidated Statements of Cash Flows - Years Ended December 31, 2001, 2000 and 1999 Notes to Consolidated Financial Statements 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, 2001 and 2000, 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, 2001. 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 auditing standards generally accepted in the United States of America. 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, 2001 and 2000, and the consolidated results of their operations and cash flows for each of the years in the three-year period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. DEMETRIUS & COMPANY, L.L.C. Wayne, New Jersey February 25, 2002, except for Note 16, which is dated March 14, 2002 RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - --------------------------- Dollars in thousands ASSETS ------ December 31, ------------ 2001 2000 ---- ---- CURRENT ASSETS: Cash and cash equivalents ................................................. $ 689 $ 81 Accounts receivable, less allowances for doubtful accounts of: 2001, $69 and 2000, $40 ............................................. 1,723 2,102 Inventories: Finished goods .......................................................... 1,422 1,605 Work in process ......................................................... 55 107 Raw materials ........................................................... 361 404 ------- ------- 1,838 2,116 Other current assets ...................................................... 953 828 Current assets of discontinued operations ................................. 325 1,339 ------- ------- TOTAL CURRENT ASSETS ................................................ 5,528 6,466 PROPERTY, PLANT AND EQUIPMENT: Land ...................................................................... 19 19 Buildings and improvements ................................................ 4,648 4,570 Machinery and equipment ................................................... 6,075 8,199 Construction in progress .................................................. 114 59 ------- ------- 10,856 12,847 Less accumulated depreciation and amortization ............................ 6,763 7,101 ------- ------- 4,093 5,746 INTANGIBLE PENSION ASSETS ................................................. 93 139 OTHER ASSETS .............................................................. 1,455 1,267 OTHER ASSETS OF DISCONTINUED OPERATIONS ................................... 1,458 1,574 ------- ------- $12,627 $15,192 ======= =======
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, ------------ 2001 2000 ---- ---- CURRENT LIABILITIES: Short-term debt ........................................... $ 858 $ 1,697 Current portion of long-term debt ......................... 347 453 Current portion of lease obligations ...................... 30 27 Accounts payable .......................................... 1,593 2,167 Accrued expenses .......................................... 1,940 1,701 Current liabilities of discontinued operations ............ 527 1,568 ------ ------ TOTAL CURRENT LIABILITIES ............................ 5,295 7,613 LONG-TERM DEBT ............................................ 2,656 3,689 LONG-TERM LEASE OBLIGATIONS ............................... 74 106 PENSION OBLIGATIONS ....................................... 1,495 633 OTHER LONG-TERM LIABILITIES ............................... 29 34 LONG-TERM LIABILITIES OF DISCONTINUED OPERATIONS .......... 206 219 COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock, no par value, authorized 5,000,000 shares: 12% cumulative convertible, $0.01 stated value; outstanding, 2001, 34,875 and 2000, 35,918 .............. -- -- Common stock par value $1 2001 2000 ---- ---- Authorized shares ...................11,848,106 11,848,106 Reserved shares ..................... 120,875 140,118 Issued (including treasury) ......... 3,519,778 3,518,735 3,520 3,519 Additional paid-in capital ................................ 29,221 29,270 Accumulated deficit ....................................... (26,671) (27,202) Accumulated other comprehensive loss ...................... (1,602) (1,093) -------- -------- 4,468 4,494 Less cost of treasury shares: 2001, 63,321 and 2000, 63,222 ........................... 1,596 1,596 -------- -------- TOTAL STOCKHOLDERS' EQUITY .............................. 2,872 2,898 -------- -------- $ 12,627 $ 15,192 ======== ========
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, ----------------------- 2001 2000 1999 ---- ---- ---- NET SALES ................................... $ 29,020 $ 28,008 $ 24,696 -------- -------- -------- Cost and expenses: Cost of sales ............................. 18,850 18,073 15,230 Selling, shipping and advertising ......... 3,745 3,915 3,895 General and administrative ................ 4,198 3,779 3,791 Depreciation and amortization ............. 726 683 582 -------- -------- -------- 27,519 26,450 23,498 -------- -------- -------- EARNINGS FROM CONTINUING OPERATIONS BEFORE INTEREST AND OTHER ITEMS .................. 1,501 1,558 1,198 -------- -------- -------- Other expense: Interest expense .......................... 533 729 664 Other-net ................................. 112 151 144 -------- -------- -------- 645 880 808 -------- -------- -------- EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES ....................... 856 678 390 Income tax provisions ....................... 325 244 98 -------- -------- -------- EARNINGS FROM CONTINUING OPERATIONS ......... 531 434 292 Loss from discontinued operations (net of tax benefit of $277) .......................... -- -- (486) -------- -------- -------- NET EARNINGS (LOSS) ......................... $ 531 $ 434 $ (194) ======== ======== ======== EARNINGS (LOSS) PER COMMON SHARE: Basic: Earnings from continuing operations........ $ 0.15 $ 0.13 $ 0.09 Loss from discontinued operations ......... -- -- (0.15) -------- -------- -------- Net earnings (loss) ....................... $ 0.15 $ 0.13 $ (0.06) ======== ======== ======== Diluted: Earnings from continuing operations........ $ 0.15 $ 0.13 $ 0.09 Loss from discontinued operations ......... -- -- (0.15) -------- -------- -------- Net earnings (loss) ....................... $ 0.15 $ 0.13 $ (0.06) ======== ======== ========
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, 2001, 2000 and 1999 Dollars in thousands Accumulated 12% Cumulative Additional Other Convertible Paid-in Accumulated Comprehensive Comprehensive Treasury Stock Preferred Stock Common Stock Capital Deficit Income (Loss) Loss (at cost) --------------- ------------ -------- -------- ------------- ------------- --------- Balance at December 31, 1998 $ -- $ 3,260 $ 29,007 $(27,442) $ (652) $ (1,594) -------- -------- -------- -------- -------- -------- Net loss - 1999 (194) $ (194) -------- Translation adjustment, net of tax 9 Pensions, net of tax 124 -------- Other comprehensive income 133 133 -------- Comprehensive loss $ (61) ======== Stock option purchased (66) -------- -------- -------- -------- -------- -------- Balance at December 31, 1999 -- 3,260 28,941 (27,636) (519) (1,594) -------- -------- -------- -------- -------- -------- Net earnings - 2000 434 $ 434 -------- Translation adjustment, net of tax (9) Pensions, net of tax (565) -------- Other comprehensive loss (574) (574) -------- Comprehensive loss $ (140) ======== Shares issued for: Sale of restricted stock 228 341 Stock options exercised 5 2 Other 26 39 Stock option purchased (53) Treasury shares (2) -------- -------- -------- -------- -------- -------- Balance at December 31, 2000 -- 3,519 29,270 (27,202) (1,093) (1,596) -------- -------- -------- -------- -------- -------- Net earnings - 2001 531 $ 531 -------- Translation adjustment, net of tax (12) Pensions, net of tax (497) -------- Other comprehensive loss (509) (509) -------- Comprehensive income $ 22 ======== Conversion -- 1 (1) Stock option purchased (48) -------- -------- -------- -------- -------- -------- Balance at December 31, 2001 $ -- $ 3,520 $ 29,221 $ (26,671) $ (1,602) $ (1,596) ======== ======== ======== ======== ======== ========
Total ----------- Balance at December 31, 1998 $ 2,579 -------- Net loss - 1999 (194) Translation adjustment, net of tax Pensions, net of tax Other comprehensive income 133 Comprehensive loss Stock option purchased (66) -------- Balance at December 31, 1999 2,452 -------- Net earnings - 2000 434 Translation adjustment, net of tax Pensions, net of tax Other comprehensive loss (574) Comprehensive loss Shares issued for: Sale of restricted stock 569 Stock options exercised 7 Other 65 Stock option purchased (53) Treasury shares (2) -------- Balance at December 31, 2000 2,898 -------- Net earnings - 2001 531 Translation adjustment, net of tax Pensions, net of tax Other comprehensive loss (509) Comprehensive income Conversion -- Stock option purchased (48) -------- $ 2,872 ========
SHARE ACTIVITY -------------------------------------------------- 12% Cumulative Convertible Preferred Stock Common Stock Treasury Stock --------------- ------------ -------------- Balance at December 31, 1998 36,518 3,259,507 62,365 Conversion (600) 600 Treasury Shares 13 ---------- ---------- ---------- Balance at December 31, 1999 35,918 3,260,107 62,378 Shares issued for: Sale of restricted stock 227,500 Stock options exercised 5,500 Other 25,628 Treasury Shares 844 ---------- ---------- ---------- Balance at December 31, 2000 35,918 3,518,735 63,222 Conversion (1,043) 1,043 Treasury Shares 99 ---------- ---------- ---------- Balance at December 31, 2001 34,875 3,519,778 63,321 ========== ========== ==========
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, ---------------------- 2001 2000 1999 ---- ---- ---- Cash Flows from Operating Activities: Net earnings (loss) ................................................................ $ 531 $ 434 $ (194) Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: Depreciation and amortization ................................................... 726 683 582 Deferred income tax provisions (benefits) ....................................... 320 236 (224) Increase (decrease) in cash from changes in: Accounts receivable .......................................................... 379 (99) (226) Inventories .................................................................. 1,762 1,918 (1,350) Other current assets ......................................................... (50) (40) 80 Accounts payable ............................................................. (574) (557) 783 Accrued expenses ............................................................. 239 25 66 Net change in pension-related accounts .......................................... 80 (2) (95) Other ........................................................................... (39) 5 (24) Discontinued operations ......................................................... (173) (416) (435) ------- ------- ------- Net cash provided by (used in) operating activities ...................................................... 3,201 2,187 (1,037) ------- ------- ------- Cash Flows from Investing Activities: Net cash used in investing activities, capital expenditures ...................................................... (538) (396) (652) ------- ------- ------- Cash Flows from Financing Activities: Proceeds from long-term debt ....................................................... -- 337 629 Proceeds from short-term debt ...................................................... -- 1,217 2,595 Proceeds from issuance of common stock ............................................. -- 576 -- Payments of long-term debt ......................................................... (1,139) (440) (425) Payments of long-term lease obligations ............................................ (29) (104) (109) Payments of short-term debt ........................................................ (839) (3,430) (894) Other .............................................................................. (48) (53) (66) ------- ------- ------- Net cash provided by (used in) financing activities ...................................................... (2,055) (1,897) 1,730 ------- ------- ------- Net increase (decrease) in cash and cash equivalents ............................... 608 (106) 41 Cash at beginning of year .......................................................... 81 187 146 ------- ------- ------- Cash and cash equivalents at end of year ........................................... $ 689 $ 81 $ 187 ======= ======= =======
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 (these together are "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 assets and 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. Aircraft and other related costs utilized by Ronson Aviation in its charter operations and held for more than one year are classified as property, plant and equipment. The term notes payable secured by these aircraft are 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 Loss in Stockholders' Equity. Transaction gains and losses are not significant in the periods presented. Fair Value of Financial Instruments - The Company's financial instruments include cash, cash equivalents, accounts receivable, accounts payable, accrued expenses, other current liabilities and short-term and long-term debt. The book values of cash, cash equivalents, accounts receivable, accounts payable, accrued expenses, other current liabilities, and short-term debt 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. Revenue Recognition - Net Sales are recognized by Ronson Consumer Products on the date of shipment of the product to customers. Net Sales at Ronson Aviation are recognized on the date of delivery of the product or service to customers. Research and Development Costs - Costs of research and new product development are charged to operations as incurred and amounted to approximately $227,000, $288,000 and $232,000 for the years ended December 31, 2001, 2000 and 1999, respectively. Advertising Costs - Costs of advertising are expensed as incurred and amounted to approximately $488,000, $432,000 and $476,000 for the years ended December 31, 2001, 2000 and 1999, respectively. Accrued Expenses - On December 31, 2001, Accrued Expenses included: accrued vacation pay, $389,000; accrued incentive compensation, $374,000; accrued health benefits, $296,000; and accrued co-op advertising, $277,000. No other item amounted to greater than 5% of total current liabilities. 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, 2001 Per Share Earnings Shares Amount -------- ------ ------ Earnings from continuing operations .............................. $ 531 Less accrued dividends on preferred stock ......................... (7) ----- BASIC ................................... $ 524 3,456 $ 0.15 ===== ===== ======= Effect of dilutive securities (1): Stock options ........................... -- Cumulative convertible preferred stock ........................ $ -- -- ----- ----- DILUTED ................................. $ 524 3,456 $ 0.15 ===== ===== ======= Year Ended December 31, 2000 Per Share Earnings Shares Amount -------- ------ ------ Earnings from continuing operations.............................. $ 434 Less accrued dividends on preferred stock......................... (8) ----- BASIC .................................. $ 426 3,401 $ 0.13 ===== ===== ======= Effect of dilutive securities (1): Stock options........................... -- Cumulative convertible preferred stock........................ $ -- -- ----- ----- DILUTED ................................ $ 426 3,401 $ 0.13 ===== ===== ======= Year Ended December 31, 1999 Earnings Per Share (Loss) Shares Amount -------- ------ ------ Earnings from continuing operations......................... $ 292 Less accrued dividends on preferred stock.................... (8) ----- Continuing operations................ 284 3,198 $ 0.09 Loss from discontinued operations.... (486) 3,198 (0.15) ----- ------- BASIC.............................. $(202) 3,198 $ (0.06) ===== ===== ======= Effect of dilutive securities (1): Stock options...................... -- Cumulative convertible preferred stock................... $ -- -- ----- ----- Continuing operations................ 284 3,198 $ 0.09 Loss from discontinued operations.... (486) 3,198 (0.15) ----- ------- DILUTED ........................... $(202) 3,198 $ (0.06) ===== ===== ======= (1) The assumed conversion of preferred shares to common shares and the stock options were anti-dilutive for all the years presented, and, therefore, were excluded from the calculation and reconciliation of Diluted Earnings (Loss) per Common Share. Stock Options - The Company has elected to follow Accounting Principles Board Opinion #25 (APB #25), "Accounting for Stock Issued to Employees", and related Interpretations in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under Statement of Financial Accounting Standards ("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. At December 31, 2001, the Company had outstanding 34,875 shares of preferred stock and 3,456,457 shares of common stock. Reclassification - Certain reclassifications of prior years' amounts have been made to conform with the current year's presentation. Recent Accounting Pronouncements - In June 2001 the Financial Accounting Standards Board ("FASB") issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". These statements become effective for the Company on January 1, 2002. In addition, in June 2001 the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations", effective for years beginning after June 15, 2002, and in August 2001 SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets", effective for years beginning after December 15, 2001. Management has reviewed the Statements and does not believe the Statements will have a material effect on the Company's financial position or results of operations. Note 2. DISCONTINUED OPERATIONS: The Loss from Discontinued Operations included the costs recorded by the Company related to the discontinuation of Prometcor as follows (in thousands): Year Ended December 31, 2001 2000 1999 ---- ---- ---- Insurance recovery income accrued, net.............................. $ 175 $ 645 $ -- Discontinuance costs accrued....... 175 645 763 ------ ------ ------ -- -- 763 Deferred income tax benefits....... -- -- (277) ------ ------ ------ Loss from discontinued operations.. $ -- $ -- $ 486 ====== ====== ====== 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 laws with the objective of selling the land and existing buildings previously used in the discontinued operations. The discontinuation of operations also required the termination of a United States Nuclear Regulatory Commission ("NRC") license for the storage and use on site of a material 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 $7,350,000. 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 2001. The liability for these estimated costs and expenses as recorded in the financial statements at December 31, 2001, was based on the lower limit of the range of costs as projected by the Company and its consultants. The estimated upper limit of the range of costs is discounted at approximately $600,000 above the lower limit. The full extent of the costs and time required for completion is not determinable until the remediation and confirmatory testing of the properties have been completed and accepted by the NJDEP. In the second half of 1999, the Company filed a lawsuit against a number of its former general liability insurance carriers seeking recovery of environmental investigation and remediation costs incurred and anticipated at various locations, primarily Prometcor. In 2000 and 2001, the Company reached settlement agreements with eleven of the twelve insurance carriers involved. (Refer to Note 16 for information regarding an additional settlement in March 2002.) To date (February 25, 2002), these settlements have totalled approximately $1,230,000. Based on the settlements to date and probable future recovery, in 2000 and 2001 Prometcor recognized net insurance recovery income of $820,000, or $1,280,000 less related costs of $460,000. 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, 2001, Current Assets of Discontinued Operations consisted primarily of net deferred income tax assets, and Other Assets of Discontinued Operations consisted primarily of land and net deferred income tax assets of Prometcor. The Current Liabilities of Discontinued Operations at December 31, 2001, consisted principally of $480,000 of accrued costs related to the environmental compliance of Prometcor. Note 3. INCOME TAXES: At December 31, 2001, the Company had, for federal income tax purposes, net operating loss carryforwards of approximately $4,350,000, expiring as follows: $1,020,000 in 2005 to 2007; $1,950,000 in 2010 to 2012; and $1,380,000 in 2018 to 2021. The Company also had available alternative minimum tax credit carryforwards of approximately $75,000. The income tax expenses (benefits) consisted of the following (in thousands): Year Ended December 31, 2001 2000 1999 ---- ---- ---- Current: Federal. . . . . . . . . . . . . . . . . . . $ 5 $ -- $ -- State. . . . . . . . . . . . . . . . . . . . (11) 8 45 Foreign. . . . . . . . . . . . . . . . . . . 11 -- -- ----- ----- ----- 5 8 45 ----- ----- ----- Deferred: Federal. . . . . . . . . . . . . . . . . . . 237 203 (181) State. . . . . . . . . . . . . . . . . . . . 83 33 (43) ----- ----- ----- 320 236 (224) ----- ----- ----- 325 244 (179) Allocated to discontinued operations . . . . . -- -- (277) ----- ----- ----- Income tax expenses-net. . . . . . . . . . . $ 325 $ 244 $ 98 ===== ===== ===== Current income taxes in the years ended December 31, 2001 and 2000, of $322,000 and $375,000, respectively, were presented net of credits arising from the utilization of available tax losses and loss carryforwards in accordance with SFAS #109. The reconciliation of estimated income taxes attributed to continuing operations at the United States statutory tax rate to reported income tax expenses was as follows (in thousands): Year Ended December 31, 2001 2000 1999 ---- ---- ---- Tax expense amount computed using statutory rate. . . . . . . . . . . . . . . . $ 291 $ 231 $ 132 State taxes, net of federal benefit . . . . . . (4) 5 30 Operations outside the US . . . . . . . . . . . 4 -- 23 Discontinued operations and other . . . . . . . 34 8 (87) ----- ----- ----- Income tax expenses-net . . . . . . . . . . . $ 325 $ 244 $ 98 ===== ===== ===== 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, 2001 2000 ---- ---- 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. . . . . . . . . . . . . $ 97 $ 104 Compensated absences, principally due to accrual for financial reporting purposes. . . . . . . . . . . . . 138 130 Compensation, principally due to accrual for financial reporting purposes. . . . . . . . . . . 154 119 Accrual of projected environmental costs, principally related to Prometcor's compliance with NJDEP and NRC requirements. . . . . . . . . . . . . . . . . . . . . 267 403 Net operating loss carryforwards. . . . . . . . . . . . 1,958 2,311 Alternative minimum tax credit carryforwards. . . . . . 75 69 Unrecognized net loss on pension plan . . . . . . . . . 1,019 688 Other . . . . . . . . . . . . . . . . . . . . . . . . . 121 101 ------ ------ Total gross deferred income tax assets. . . . . . . . 3,829 3,925 Less valuation allowance. . . . . . . . . . . . . . . 155 227 ------ ------ Net deferred income tax assets. . . . . . . . . . . . 3,674 3,698 ------ ------ Deferred income tax liabilities: Pension expense, due to contributions in excess of net accruals. . . . . . . . . . . . . . . . . . . . . 460 492 Other . . . . . . . . . . . . . . . . . . . . . . . . . 89 109 ------ ------ Total gross deferred income tax liabilities . . . . . 549 601 ------ ------ Net deferred income taxes . . . . . . . . . . . . . . $3,125 $3,097 ====== ====== 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 $3,674,000 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 $4,600,000 in the years prior to the expiration of the net operating loss carryforwards in 2021. 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 $227,000 at December 31, 2000, to $155,000 at December 31, 2001, and from $324,000 at December 31, 1999, to $227,000 at December 31, 2000. The net deferred income tax assets were classified in the Consolidated Balance Sheets as follows (in thousands): December 31, 2001 2000 ---- ---- Current: Other current assets. . . . . . . . . . . . . . . . . $ 506 $ 430 Current assets of discontinued operations . . . . . . 226 368 ------ ------ Total current . . . . . . . . . . . . . . . . . . . 732 798 ------ ------ Long Term: Other assets. . . . . . . . . . . . . . . . . . . . . 1,198 988 Other assets of discontinued operations . . . . . . . 1,195 1,311 ------ ------ Total long term . . . . . . . . . . . . . . . . . . 2,393 2,299 ------ ------ Total net deferred income tax assets. . . . . . . . . . $3,125 $3,097 ====== ====== Note 4. SHORT-TERM DEBT: In 1995 RCPC entered into an agreement with Fleet Capital Corporation ("Fleet"), formerly known as Summit Bank, for a Revolving Loan. The Revolving Loan of $820,000 at December 31, 2001, 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 Revolving Loan bears interest at the rate of 1.5% above Fleet's prime rate (4.75% at December 31, 2001). The Revolving Loan is payable on demand under an agreement which expires June 30, 2002. The Company is currently in discussions with Fleet regarding the extension of the line of credit. 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. The Fleet agreement also has restrictive covenants which, among other things, limit the transfer of assets between the Company and its subsidiaries. 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 2001 Ronson-Canada and CIBC extended Ronson-Canada's Revolving Loan to 2002. The extended agreement also amended certain other terms of the Revolving Loan agreement. The Revolving Loan balance of $38,000 (C$61,000) at December 31, 2001, 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% over the CIBC prime rate (4.0% at December 31, 2001). 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, 2001, Ronson Consumer Products had unused borrowings available at December 31, 2001, of about $718,000 under the Fleet 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 above.) In 1997 Ronson Aviation entered into an agreement with Fleet for a Revolving Loan and a Term Loan (refer to Note 5 below regarding the Term Loan). In May 1999 Ronson Aviation and Fleet extended Ronson Aviation's Revolving Loan to June 30, 2002. The Company is currently in discussions with Fleet regarding the extension of the line of credit. The Revolving Loan is under a line of credit up to $500,000 to Ronson Aviation based on the level of its accounts receivable. The Revolving Loan currently bears interest at the rate of 1.5% above Fleet's prime rate (4.75% at December 31, 2001). The Revolving Loan is payable on demand and is secured by the accounts receivable, inventory and machinery and equipment (excluding aircraft) of Ronson Aviation; and the guarantees of the Company and RCPC. The Fleet agreement also contains restrictive covenants. At December 31, 2001, Ronson Aviation utilized no borrowings under the Revolving Loan. Based on no loan outstanding and the level of accounts receivable at December 31, 2001, Ronson Aviation had unused borrowings available at December 31, 2001, of about $247,000 under the Fleet line of credit described above. At December 31, 2001, the weighted average interest rate for the total short-term debt was 6.2%. Note 5. LONG-TERM DEBT: Composition (in thousands): December 31, 2001 2000 ---- ---- Mortgage loan payable, Fleet (a). . . . . . . . $ 1,590 $ 1,659 Term note payable, Fleet (b). . . . . . . . . . 43 100 Notes payable, Fleet (c). . . . . . . . . . . . 1,186 2,173 Promissory term note payable (d). . . . . . . . 184 206 Other . . . . . . . . . . . . . . . . . . . . . -- 4 ------- ------- 3,003 4,142 Less portion in current liabilities . . . . . . 347 453 ------- ------- Balance of long-term debt . . . . . . . . . . . $ 2,656 $ 3,689 ======= ======= (a) In May 1999 RCPC and Fleet entered into an agreement, in the original amount of $1,760,000, which refinanced the existing Mortgage Loan agreement on the RCPC property. The Mortgage Loan balance was $1,590,000 at December 31, 2001. The Mortgage Loan agreement is secured by a first mortgage on the land, buildings and improvements of RCPC, and is payable in sixty monthly installments of $17,218, including interest, with a final installment on May 1, 2004, of approximately $1,402,000. The loan bears interest at a fixed rate of 8.39%. (b) In 1997 Ronson Aviation entered into a Term Loan agreement with Fleet in the original amount of $285,000. In May 1999 Ronson Aviation and Fleet amended the Term Loan agreement to extend the payment terms for two years to June 30, 2002. The Term Loan with a balance of $43,000 at December 31, 2001, is payable in monthly installments of $4,750 plus interest, with a final installment on June 30, 2002, of $14,250. The Term Loan bears interest at the rate of 1.5% above Fleet's prime rate. (Refer to Note 4 above.) (c) The Notes Payable, Fleet, consisted of three term loans payable by Ronson Aviation to Fleet. The notes bear interest at the rate of 1.5% over the prime rate, are collateralized by a specific aircraft and are guaranteed by the Company. One of the notes, in the amount of approximately $10,000 at December 31, 2001, is payable in monthly installments of $2,090 plus interest through May 18, 2002. Another note in the amount of approximately $1,022,000 at December 31, 2001, is payable in monthly installments of $14,389 plus interest through March 2003 with a final payment of about $806,000 on April 20, 2003. The other note in the amount of approximately $154,000 at December 31, 2001, is payable in monthly installments of $1,875 plus interest through September 2003 with a final payment of about $114,000 on October 29, 2003. (d) In 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 $184,000 at December 31, 2001, is payable in monthly installments of $2,775 including interest, through September 14, 2008. The Promissory Term Note bears interest at the rate of 6% per annum, is secured by the leased premises of Ronson Aviation's new aircraft fueling facilities complex and all related equipment, and also contains restrictive covenants. At December 31, 2001, fixed assets with a net book value of $3,933,000 and accounts receivable and inventories of $3,761,000 are pledged as collateral for the debt detailed in Notes 4 and 5. Net assets of consolidated subsidiaries, excluding intercompany accounts, amounted to approximately $3,025,000 at December 31, 2001, 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, 2001. Long-term debt matures as follows: 2002, $347,000; 2003, $1,087,000; 2004, $1,457,000; 2005, $27,000; 2006, $29,000; and 2007 through 2008, $56,000. Note 6. LEASE OBLIGATIONS: Lease expenses consisting principally of office and warehouse rentals, totalled $498,000, $469,000 and $468,000 for the years ended December 31, 2001, 2000 and 1999, respectively. At December 31, 2001, 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: 2002 . . . . . . . . . . . $ 356 $ 315 $ 41 2003 . . . . . . . . . . . 315 275 40 2004 . . . . . . . . . . . 298 264 34 2005 . . . . . . . . . . . 265 254 11 2006 . . . . . . . . . . . 105 105 -- ------ ------ ----- Total obligations. . . . . $1,339 $1,213 126 ====== ====== Less: Amount representing interest. . . . . . 21 ----- Present value of capitalized lease obligations . . . $ 105 ===== Capitalized lease property included in the Consolidated Balance Sheets is presented below (in thousands): December 31, 2001 2000 ---- ---- Machinery and equipment . . . . . . . . $ 166 $ 166 Less accumulated amortization . . . . . 65 32 ----- ----- $ 101 $ 134 ===== ===== Ronson Aviation leases land under a leasehold consisting of six five-year terms automatically renewed, with the last five-year term expiring in November 2007. The lease may be extended for up to five additional five-year terms through November 2032, provided that during the five-year term ending November 2007, Ronson Aviation invests from $600,000 to over $1,500,000 in capital improvements. Note 7. RETIREMENT PLANS: The Company and its subsidiaries have trusteed retirement plans covering substantially all employees. The Company's funding policy is to make minimum annual contributions as required by applicable regulations. The Plan covering union members generally provides 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. The Company's two remaining defined benefit plans were merged in 2000. Plan assets primarily include widely-held common stocks, 171,300 shares of common stock of the Company, a guaranteed annuity contract and money market funds. The following table sets forth the plan's aggregate funded status and amounts recognized in the Company's Consolidated Balance Sheets (in thousands): December 31, 2001 2000 ---- ---- Change in Benefit Obligation: Benefit obligation at beginning of year.... $ 4,680 $ 4,640 Service cost............................... 15 14 Interest cost.............................. 304 325 Actuarial loss............................. 155 155 Increase in benefit obligation due to decreased discount rate.................. 159 157 Benefits paid.............................. (465) (611) ------- ------- Benefit obligation at end of year.......... 4,848 4,680 ------- ------- Change in Plan Assets: Fair value of plan assets at beginning of year.................................. 4,046 4,892 Actual return on plan assets............... (424) (364) Employer contributions..................... 196 130 Benefits paid.............................. (465) (611) ------- ------- Fair value of plan assets at end of year... 3,353 4,047 ------- ------- Funded status.............................. (1,495) (633) Unrecognized actuarial loss................ 2,549 1,722 Unrecognized prior service cost and transition obligation.................... 93 139 ------- ------- Net amount recognized........................ $ 1,147 $ 1,228 ======= ======= Amounts Recognized in the Consolidated Balance Sheets Consist of: Accrued benefit liability................ $(1,495) $ (633) Intangible asset......................... 93 139 Accumulated other comprehensive loss, excluding the income tax effect........ 2,549 1,722 ------- ------- Net amount recognized........................ $ 1,147 $ 1,228 ======= ======= December 31, 2001 2000 ---- ---- Weighted-average assumptions: Discount rate.............................. 6.00% 6.50% Expected return on plan assets............. 5.50% 6.00% If the additional minimum liability recorded exceeds the 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, 2001 2000 1999 ---- ---- ---- Components of net periodic benefit cost: Service cost. . . . . . . . . . . $ 15 $ 14 $ 16 Interest cost . . . . . . . . . . 304 325 320 Expected return on plan assets. . (223) (294) (288) Amortization of prior service cost and transition obligation. 47 54 63 Recognized actuarial loss . . . . 134 30 52 ------ ------ ------ Net pension expense . . . . . . . $ 277 $ 129 $ 163 ====== ====== ====== The accumulated benefit obligation exceeded the fair value of plan assets as of December 31, 2001 and 2000. The Company contributes to its defined contribution plan 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 $70,000, $70,000 and $71,000 for this plan were recorded in 2001, 2000 and 1999, respectively. Note 8. COMMITMENTS AND CONTINGENCIES: In 1999 Ronson Aviation completed the installation of a new fueling facility and ceased use of most of its former underground storage tanks. The primary underground fuel storage tanks formerly used by Ronson Aviation were removed in 1999 as required by the NJDEP. Related contaminated soil was removed and remediated. In 2000 initial groundwater tests were completed. Ronson Aviation's environmental consultants have advised the Company that preliminary results of that testing indicate that no further actions should be required. The extent of groundwater contamination cannot be determined until final testing has been completed and accepted by the NJDEP. The Company intends to vigorously pursue its rights under the leasehold and under the statutory and regulatory requirements. Since the amount of additional costs, if any, and their ultimate allocation cannot be fully determined at this time, the effect on the Company's financial position or results of future operations cannot yet be determined, but management believes that the effect will not be material. The Company is involved in a State of New Jersey Gross Income Tax audit for the years ended December 31, 1997 through December 31, 2000. The total claimed by the State of New Jersey is $144,000, related to availability of net operating loss carryforwards from 1995. The Company has appealed the determination by the New Jersey Division of Taxation. Based on statements of the Company's counsel in the matter, management believes it has a strong case and that the Company will not be liable for the assessment. The Company has accrued the expected cost of defense in the matter. The Company is involved in various lawsuits 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 officers of the Company and its subsidiary. The contracts expire on December 31, 2004 and 2002, respectively. Base salaries in the years 2002, 2003 and 2004 are $778,822, $659,248 and $705,395, 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 ($61,000 at December 31, 2001, 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. Dividends in arrears at December 31, 2001, totalled $1.9425 per share of preferred stock (thirty-seven quarters at $0.0525 per share per quarter), or approximately $68,000 in the aggregate. In 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, directors and other key employees of the Company and its subsidiaries at not less than 100% of the fair market value on the date on which options are granted. On November 27, 2001, the stockholders approved the adoption of the Company's 2001 Incentive Stock Option Plan which provides for the grant of options for up to 125,000 shares of common stock. 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. Options granted under the plans 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. The fair value for options granted in 2001, 2000 and 1999 was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions: Year Ended December 31, 2001 2000 1999 ---- ---- ---- Risk-free interest rate 4.0% 5.0% 6.5% Dividend yield 0% 0% 0% Volatility factor - expected market price of Company's common stock 0.5 0.4 0.4 Weighted average expected life of options 5 years 5 years 5 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, 2001 2000 1999 ---- ---- ---- Pro forma Results of Operations: Earnings from continuing operations..... $ 510 $ 433 $ 276 Loss from discontinued operations....... -- -- (486) ------- ------- ------- Net earnings (loss)..................... $ 510 $ 433 $ (210) ======= ======= ======= Pro forma Earnings (Loss) per Common Share: Basic: Earnings from continuing operations... $ 0.15 $ 0.13 $ 0.08 Loss from discontinued operations..... -- -- (0.15) ------- ------- ------- Net earnings (loss)................... $ 0.15 $ 0.13 $ (0.07) ======= ======= ======= Diluted: Earnings from continuing operations... $ 0.15 $ 0.13 $ 0.08 Loss from discontinued operations..... -- -- (0.15) ------- ------- ------- Net earnings (loss)................... $ 0.15 $ 0.13 $ (0.07) ======= ======= ======= Pro forma Results of Operations in 2001, 2000 and 1999 have been adjusted to reflect pro forma increases in compensation expense of $21,000, $1,000 and $16,000, respectively, (net of taxes) due to issuance of stock options. A summary of the Company's stock option activity and related information for the three years ended December 31, 2001, is as follows: Number of Weighted Average Options Exercise Price --------- ---------------- Outstanding at December 31, 1998........ 88,700 $ 2.80 Granted............................... 23,800 2.51 Expired............................... (3,050) 2.88 ------ Outstanding at December 31, 1999........ 109,450 2.74 Granted............................... 2,500 2.17 Exercised............................. (5,500) 1.63 Expired/Cancelled..................... (2,250) 2.78 ------ Outstanding at December 31, 2000........ 104,200 2.78 Granted............................... 61,700 1.25 Expired............................... (79,900) 2.86 ------- Outstanding at December 31, 2001........ 86,000 1.61 ====== ====== Exercisable at December 31, 2001........ 24,300 $ 2.50 ====== ====== Weighted average fair value of options granted during the year for options on which the exercise price: Equals the market price on the grant date $0.58 ===== Exceeds the market price on the grant date $0.55 ===== Exercise prices for options outstanding as of December 31, 2001, ranged as follows: 61,700 options from $1.21 to $1.33 per share, 1,000 options at $2.17 per share, and 23,300 options from $2.44 to $2.68 per share. The weighted average contractual life of those options was 4.07 years. Note 11. STATEMENTS OF CASH FLOWS: Certificates of deposit that have a maturity of less than 90 days are considered cash equivalents for purposes of the accompanying Consolidated Statements of Cash Flows. Supplemental disclosures of cash flow information are as follows (in thousands): Year Ended December 31, 2001 2000 1999 ---- ---- ---- Cash Payments for: Interest. . . . . . . . . . $ 492 $ 705 $ 633 Income taxes. . . . . . . . . 27 8 71 Financing & Investing Activities Not Affecting Cash: Capital lease obligations incurred . -- 72 65 Issuance of 25,628 shares of common stock for services. . . . . . -- 65 -- In 2001 charter aircraft with a book value of $1,490,000 were transferred from fixed assets to inventory. The aircraft were later sold. 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, mass merchandisers, drug chains, convenience stores, and automotive and hardware representatives. 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, 2001 2000 1999 ---- ---- ---- Net sales: Consumer Products ............... $ 16,024 $ 16,081 $ 16,096 Aviation Services ............... 12,996 11,927 8,600 -------- -------- -------- Consolidated .................. $ 29,020 $ 28,008 $ 24,696 ======== ======== ======== Earnings (loss) before interest, other items and intercompany charges: Consumer Products ............... $ 1,952 $ 1,967 $ 2,557 Aviation Services ............... 1,518 928 398 -------- -------- -------- Total Reportable Segments ....... 3,470 2,895 2,955 Corporate and others ............ (1,737) (1,447) (1,570) Non-recurring income (charges) .............. (232) 110 (187) -------- -------- -------- Consolidated .................. $ 1,501 $ 1,558 $ 1,198 ======== ======== ======== Interest expense: Consumer Products ............... $ 172 $ 249 $ 206 Aviation Services ............... 198 329 319 -------- -------- -------- Total Reportable Segments ....... 370 578 525 Corporate and others ............ 163 151 139 -------- -------- -------- Consolidated .................. $ 533 $ 729 $ 664 ======== ======== ======== Depreciation and amortization: Consumer Products ............... $ 259 $ 252 $ 236 Aviation Services ............... 428 396 327 -------- -------- -------- Total Reportable Segments ....... 687 648 563 Corporate and others ............ 39 35 19 -------- -------- -------- Consolidated .................. $ 726 $ 683 $ 582 ======== ======== ======== Earnings (loss) from continuing operations before intercompany charges and taxes: Consumer Products ............... $ 1,755 $ 1,696 $ 2,326 Aviation Services ............... 1,316 587 52 -------- -------- -------- Total Reportable Segments ....... 3,071 2,283 2,378 Corporate and others ............ (1,983) (1,715) (1,801) Non-recurring income (charges) .............. (232) 110 (187) -------- -------- -------- Consolidated .................. $ 856 $ 678 $ 390 ======== ======== ======== Segment assets: Consumer Products ............... $ 4,660 $ 5,428 $ 5,515 Aviation Services ............... 4,793 5,803 7,806 -------- -------- -------- Total Reportable Segments ....... 9,453 11,231 13,321 Corporate and others ............ 1,391 1,048 1,034 Discontinued operations ......... 1,783 2,913 2,373 -------- -------- -------- Consolidated .................. $ 12,627 $ 15,192 $ 16,728 ======== ======== ======== Segment expenditures for long-lived assets: Consumer Products ............... $ 151 $ 258 $ 159 Aviation Services ............... 384 201 526 -------- -------- -------- Total Reportable Segments ....... 535 459 685 Corporate and others ............ 3 10 31 -------- -------- -------- Consolidated .................. $ 538 $ 469 $ 716 ======== ======== ========
Geographic Information regarding the Company's net sales and long-lived assets was as follows (in thousands): Year Ended December 31, 2001 2000 1999 ---- ---- ---- Net Sales (1): United States..................... $ 27,125 $ 26,233 $ 23,232 Canada............................ 1,682 1,665 1,386 Other foreign countries........... 213 110 78 -------- -------- -------- $ 29,020 $ 28,008 $ 24,696 ======== ======== ======== December 31, 2001 2000 ---- ---- Long-Lived Assets: United States............................ $ 4,341 $ 5,983 Canada................................... 15 26 -------- -------- $ 4,356 $ 6,009 ======== ======== (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 year ended December 31, 2001, no customer accounted for more than 10% of Consolidated Net Sales or Consolidated Accounts Receivable. For the years ended December 31, 2000 and 1999, net sales which amounted to approximately $2,832,000 and $3,176,000, respectively, of Consolidated Net Sales were made by Ronson Consumer Products to various units of one customer. As of December 31, 2000, accounts receivable from that customer amounted to approximately 12% of Consolidated Accounts Receivable. No other customer accounted for more than 10% of Consolidated Net Sales or Consolidated Accounts Receivable for the years ended December 31, 2000 and 1999. Note 13. COMPREHENSIVE INCOME: Comprehensive Income is the change in equity during a period from transactions and other events from nonowner sources. The Company is required to classify items of other comprehensive income in financial statements and to display the accumulated balance of other comprehensive income (loss) separately in the equity section of the Consolidated Balance Sheets. Changes in the components of Other Comprehensive Income (Loss) and in Accumulated Other Comprehensive Loss for 2001, 2000, and 1999 were as follows (in thousands): Foreign Currency Minimum Pension Accumulated Other Translation Liability Comprehensive Adjustment (1) Adjustment(2) Loss -------------- ------------- ---- Balance at December 31, 1998.... $ (58) $ (594) $ (652) Change during 1999... 9 124 133 ------ ------- ------- Balance at December 31, 1999.... (49) (470) (519) Change during 2000... (9) (565) (574) ------ ------- ------- Balance at December 31, 2000.... (58) (1,035) (1,093) Change during 2001... (12) (497) (509) ------ ------- ------- Balance at December 31, 2001.... $ (70) $(1,532) $(1,602) ====== ======= ======= (1) The foreign currency translation adjustment component of Accumulated Other Comprehensive Loss is presented above net of related tax benefits of $47,000, $39,000, $32,000 and $38,000 as of December 31, 2001, 2000, 1999 and 1998, respectively. For the years ended December 31, 2001, 2000 and 1999, the changes in the foreign currency translation component are presented above net of related tax provisions (benefits) of $(8,000), $(7,000) and $6,000, respectively. In the years 2001 and 2000, the income tax benefits were reclassified, resulting in increased deferred tax assets and reduced Accumulated Other Comprehensive Loss by the above $47,000 and $39,000, respectively. (2) The minimum pension liability component of Accumulated Other Comprehensive Loss is presented above net of related tax benefits of $1,019,000, $688,000, $312,000 and $396,000 as of December 31, 2001, 2000, 1999 and 1998, respectively. For the years ended December 31, 2001, 2000 and 1999, the changes in the minimum pension liability component are presented above net of related tax provisions (benefits) of $(331,000), $(376,000) and $84,000, respectively. Note 14. CONCENTRATIONS: During 2001 and at year-end the Company's subsidiaries had cash deposits in a bank in excess of FDIC insured limits. The Company periodically reviews the financial condition of the bank to minimize its exposure. 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 greater than 5% shareholder of the Company. The agreement provided that Mr. Dinger perform certain consulting services for the Company for a period of 18 months expiring on April 7, 2000. On March 6, 2000, the Company and Mr. Dinger entered into a new consulting agreement to be effective upon the expiration date of the original agreement. The new agreement provides that Mr. Dinger will continue to perform consulting services for the Company for a period of 48 months at a fee of $7,000 per month. During the years ended December 31, 2001, 2000 and 1999, Mr. Dinger was compensated $84,000, $76,500, and $54,000, respectively, under the agreements. In October 1998 Mr. Dinger granted an option to the Company to purchase the 186,166 shares of the Company's common stock held by Mr. Dinger. The option was for a period of 18 months expiring on April 7, 2000, and the exercise price of the option was $5.25 per share. On March 6, 2000, Mr. Dinger granted a new option to the Company, to purchase the 413,666 shares of the Company's common stock now held by Mr. Dinger. The option is for a period of 48 months. The exercise price of the option is $5.25 per share for the first two years, and the option price in the second two year period is $7.50 per share. The cost of the option is $4,000 per month for the period of the option or until exercised. As part of the new 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. In March 2000 Mr. Dinger purchased 227,500 shares of newly issued restricted common stock of the Company at the price of $2.50 per share. The Company incurred costs for the option of $48,000, $52,500, and $66,000 during the years ended December 31, 2001, 2000 and 1999, respectively, which were charged to Additional Paid-in Capital. The Company incurred costs for consulting services under agreements with two directors of the Company of $133,000, $124,000, and $123,000 in the years ended December 31, 2001, 2000 and 1999, respectively. The Company incurred costs of $26,000, $41,000, and $64,000 in the years ended December 31, 2001, 2000 and 1999, 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. Note 16. SUBSEQUENT EVENTS: On March 6, 2002, the Company reached a settlement with the last remaining insurance company in the matter seeking recovery of environmental and remediation costs. (Refer to Note 2 above.) This last settlement was in the total amount of $600,000. After related costs, the Company expects to recognize Income From Discontinued Operations in the first quarter of 2002 of $285,000 before income taxes and $170,000 after income taxes due to this settlement. On March 14, 2002, the Company's Board of Directors declared a cash dividend on the Company's 12% Cumulative Convertible Preferred Stock in the amount of $2.0475 per preferred share, payable on April 15, 2002. The cash dividend declared represents payment of 39 quarters of preferred dividends at $0.0525 per quarter per preferred share, in the aggregate amount of approximately $71,000, and the cash dividend payment will bring all preferred dividends current through April 15, 2002. On March 14, 2002, the Company's Board of Directors declared a 5% stock dividend on the Company's outstanding common stock payable on April 15, 2002. FORM 10-K -- ITEM 14 (a)(2) and (d) RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES LIST OF FINANCIAL STATEMENT SCHEDULES Schedule I Condensed Financial Information of Company INDEPENDENT AUDITORS' REPORT ---------------------------- The Board of Directors Ronson Corporation: Under date of February 25, 2002, we reported on the consolidated balance sheets of Ronson Corporation and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of operations, and cash flows for each of the years in the three year period ended December 31, 2001 as contained in the annual report on Form 10-K for the year 2001. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedule as listed in the accompanying index. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth herein. DEMETRIUS & COMPANY, L.L.C. Wayne, New Jersey February 25, 2002, except for Note G, which is dated March 14, 2002 SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT RONSON CORPORATION - -------------------------------------------------------------------------------- CONDENSED BALANCE SHEETS (dollars in thousands) DECEMBER 31, ------------ ASSETS 2001 2000 ------ ---- ---- CURRENT ASSETS: Cash $ -- $ -- Other current assets 246 287 -------- -------- Total Current Assets 246 287 Property, plant, and equipment 249 246 Less accumulated depreciation and amortization 226 207 -------- -------- 23 39 Other assets 4,794 4,014 -------- -------- TOTAL ASSETS $ 5,063 $ 4,340 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Current portion of lease obligations $ 5 $ 4 Accounts payable 85 132 Other current liabilities 439 451 -------- -------- Total Current Liabilities 529 587 Long-term lease obligations 10 15 Pension obligation 1,652 840 Commitments and Contingencies STOCKHOLDERS' EQUITY: Preferred stock -- -- Common stock 3,520 3,519 Additional paid-in capital 29,221 29,270 Accumulated deficit (26,671) (27,202) Accumulated other comprehensive deficit (1,602) (1,093) -------- -------- 4,468 4,494 Less cost of treasury shares: 2001, 63,321 and 2000, 63,222 common shares 1,596 1,596 -------- -------- 2,872 2,898 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,063 $ 4,340 ======== ======== The Notes to Consolidated Financial Statements of Ronson Corporation and its Wholly Owned Subsidiaries are an integral part of these statements. See accompanying Notes to Condensed Financial Information of Registrant. SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT RONSON CORPORATION - -------------------------------------------------------------------------------- CONDENSED STATEMENTS OF OPERATIONS (dollars in thousands) YEAR ENDED DECEMBER 31, 2001 2000 1999 ---- ---- ---- Management administration (from wholly owned subsidiaries eliminated in consolidation) $ 2,370 $ 2,523 $ 1,872 ------- ------- ------- Costs and expenses: General and administrative expenses 1,734 1,444 1,567 Interest expense (includes inter- company interest expense of $113, $100 and $100 in 2001, 2000 and 1999, respectively, eliminated in consolidation) 162 150 139 Non-operating expense - net 83 89 92 ------- ------- ------- 1,979 1,683 1,798 ------- ------- ------- EARNINGS BEFORE INCOME TAXES AND EQUITY IN NET EARNINGS (LOSS) OF SUBSIDIARIES 391 840 74 Income tax provisions 106 286 231 Equity in net earnings (loss) of subsidiaries (includes loss from discontinued operations of $486 in 1999) 246 (120) (37) ------- ------- ------- NET EARNINGS (LOSS) $ 531 $ 434 $ (194) ======= ======= ======= The Notes to Consolidated Financial Statements of Ronson Corporation and its Wholly Owned Subsidiaries are an integral part of these statements.See accompanying Notes to Condensed Financial Information of Registrant. SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT RONSON CORPORATION - -------------------------------------------------------------------------------- CONDENSED STATEMENTS OF CASH FLOWS (dollars in thousands) YEAR ENDED DECEMBER 31, 2001 2000 1999 ---- ---- ---- Cash Flows from Operating Activities: Net earnings (loss) $ 531 $ 434 $(194) Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: Equity in net (earnings) loss of subsidiaries (246) 120 37 Depreciation and amortization 19 21 17 Deferred income tax expenses (benefits) (30) (4) 199 Increase (decrease) in cash from changes in current assets and current liabilities (13) (199) 5 Increase (decrease) in net advances from subsidiaries (272) (989) 55 Net change in pension-related accounts 65 72 (6) Other 1 37 (40) ----- ----- ----- Net cash provided by (used in) operating activities 55 (508) 73 ----- ----- ----- Cash Flows from Investing Activities: Net cash used in investing activities, capital expenditures (3) (10) (7) ----- ----- ----- Cash Flows from Financing Activities: Issuance of common stock -- 576 -- Payments of leases (4) (5) -- Other (48) (53) (66) ----- ----- ----- Net cash provided by (used in) financing activities (52) 518 (66) ----- ----- ----- Net increase in cash -- -- -- Cash at beginning of year -- -- -- ----- ----- ----- Cash at end of year $ -- $ -- $ -- ===== ===== ===== The Notes to Consolidated Financial Statements of Ronson Corporation and its Wholly Owned Subsidiaries are an integral part of these statements.See accompanying Notes to Condensed Financial Information of Registrant. SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT RONSON CORPORATION ---------------------------------------------------------- NOTES TO CONDENSED FINANCIAL STATEMENTS NOTE A: Condensed Financial Statements. The accompanying financial statements should be read in conjunction with the consolidated financial statements of the Registrant, Ronson Corporation (the "Company") and its subsidiaries included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001. The Company's wholly owned subsidiaries in the condensed financial statements are accounted for by the equity method of accounting. The Company has authorized 5,000,000 shares of preferred stock with no par value. Outstanding shares of 12% Cumulative Convertible Preferred Stock were 34,875 and 35,918 at December 31, 2001 and 2000, respectively. (Refer to Notes F and G below.) The Company has authorized 11,848,106 shares of common stock with a par value of $1.00, of which 3,456,457 and 3,455,513 were outstanding at December 31, 2001 and 2000, respectively. (Refer to Note G below.) NOTE B: Other Assets. December 31, (in thousands) 2001 2000 ---- ---- Investment in subsidiaries $2,787 $2,488 Deferred income tax assets, net 868 535 Intangible pension assets 27 53 Net advances to subsidiaries 918 740 Other 194 198 ------ ------ $4,794 $4,014 ====== ====== Investment in subsidiaries was eliminated in consolidation. The Company is amortizing the intangible pension assets in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") #87, "Employers' Accounting for Pensions". The net advances from subsidiaries of $918,000 and $740,000 at December 31, 2001 and 2000, respectively, were eliminated in consolidation. NOTE C: Unrecognized Net Loss on Pension Plans. SFAS #87 requires that 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, net of tax, as a separate component of Stockholders' Equity. This unrecognized net loss is being amortized over future periods as a component of pension expense. NOTE D: Income Taxes. The Company and its domestic subsidiaries have elected to allocate consolidated federal income taxes on the separate return method. Under this method of allocation, income tax expenses (benefits) are allocated to the Company and each subsidiary based on its taxable income (loss) and net operating loss carryforward. In accordance with SFAS #109, "Accounting for Income Taxes" the Company is to record a deferred income tax asset for net operating loss and credit carryforwards when the ultimate realization is more likely than not. In 2001, 2000 and 1999, the Company and its subsidiaries recorded the expenses (benefits) of net deferred income tax assets of $320,000, $236,000 and $(224,000), respectively, of which $(30,000), $(4,000) and $199,000, respectively, were allocated to the Company. NOTE E: Statement of Cash Flows. Certificates of deposit that have a maturity of less than 90 days are considered cash equivalents for purposes of the accompanying Condensed Statements of Cash Flows. NOTE F: Preferred Stock. Dividends in arrears at December 31, 2001, totalled $1.9425 per share of preferred stock (thirty-seven quarters at $0.0525 per share per quarter), or approximately $68,000 in the aggregate. NOTE G: Subsequent Event. On March 14, 2002, the Company's Board of Directors declared a cash dividend on the Company's 12% Cumulative Convertible Preferred Stock in the amount of $2.0475 per preferred share, payable on April 15, 2002. The cash dividend declared represents payment of 39 quarters of preferred dividends at $0.0525 per quarter per preferred share, in the aggregate amount of approximately $71,000, and the cash dividend payment will bring all preferred dividends current through April 15, 2002. On March 14, 2002, the Company's Board of Directors declared a 5% stock dividend on the Company's outstanding common stock payable on April 15, 2002. EX-23.1 4 exhibit23a.txt EXHIBIT 23(a) Independent Auditors' Consent ----------------------------- The Board of Directors Ronson Corporation: We consent to incorporation by reference in the Registration Statements (No. 2-87783, No. 33-13696, No. 33-25240 and No. 33-21042) on Forms S-8, S-2, S-8 and S-2, respectively, of Ronson Corporation of our report, dated February 25, 2002, relating to the consolidated balance sheets, statements of operations, changes in stockholders' equity and cash flows of Ronson Corporation and subsidiaries for the year ended December 31, 2001, which report appears in the December 31, 2001, annual report on Form 10-K of Ronson Corporation. DEMETRIUS & COMPANY, L.L.C. Wayne, New Jersey March 26, 2002 EX-99 5 exhibit99.txt EXHIBIT 99(a) REGISTRAR AND TRANSFER COMPANY RONSON CORPORATION ANNUAL MEETING OF STOCKHOLDERS NOVEMBER 27, 2001 REPORT OF INSPECTORS OF ELECTION We, the undersigned, having been duly appointed to act as Inspectors of Election at the Annual Meeting of Stockholders of RONSON CORPORATION, held on November 27, 2001, hereby certify that the number of shares of stock outstanding is 3,519,731; that the number of shares entitled to vote is 3,456,466; that the number of shares present thereat in person or by proxy is 3,202,871; that we received the votes of the Stockholders of said Meeting and that: 1. ELECTION OF DIRECTORS Class II (terms expire at 2004 Annual Meeting of Stockholders): FOR % WITHHOLD % --- - -------- - Robert A. Aronson 2,789,091 87.1 413,780 12.9 --------- ---- ------- ---- Erwin M. Ganz 2,736,573 85.4 466,298 14.5 --------- ---- ------- ---- Justin P. Walder 2,789,258 87.1 413,613 12.9 --------- ---- ------- ---- 2. To approve the Ronson Corporation 2001 Incentive Stock Option Plan. FOR % AGAINST % ABSTAIN % --- - ------- - ------- - 2,710,347 84.6 479,164 15.0 13,360 0.4 --------- ---- ------- ---- ------ --- 3. To ratify the appointment of DEMETRIUS & Company, L.L.C. FOR % AGAINST % ABSTAIN % --- - ------- - ------- - 2,847,703 88.9 352,898 11.0 2,270 0.1 --------- ---- ------- ---- ----- --- /s/Florence P. Bogaenko ------------------------ Florence P. Bogaenko /s/Daniel M. Flynn ------------------------ Daniel M. Flynn -----END PRIVACY-ENHANCED MESSAGE-----