10-Q 1 form10q-45895_8602.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549-1004 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2002 ------------- Commission File Number 1-1031 ------ RONSON CORPORATION -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New Jersey 22-0743290 -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Corporate Park III-Campus Drive, P.O. Box 6707, Somerset, NJ 08875 -------------------------------------------------------------------------------- (Address of principal executive offices) (732) 469-8300 -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] As of June 30, 2002, there were 3,628,316 shares of the registrant's common stock outstanding. 2 RONSON CORPORATION FORM 10-Q INDEX --------------- PAGE ---- PART I - FINANCIAL INFORMATION: CONSOLIDATED BALANCE SHEETS: JUNE 30, 2002 AND DECEMBER 31, 2001 3 CONSOLIDATED STATEMENTS OF EARNINGS: QUARTER ENDED JUNE 30, 2002 AND 2001 4 SIX MONTHS ENDED JUNE 30, 2002 AND 2001 5 CONSOLIDATED STATEMENTS OF CASH FLOWS: SIX MONTHS ENDED JUNE 30, 2002 AND 2001 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 13 PART II - OTHER INFORMATION: ITEM 1 - LEGAL PROCEEDINGS 17 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 17 3
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ---------------------------------------------------- (in thousands of dollars) June 30, December 31, 2002 2001 ----------- ----------- (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 725 $ 689 Accounts receivable, net 1,668 1,723 Inventories: Finished goods 1,479 1,422 Work in process 84 55 Raw materials 431 361 -------- -------- 1,994 1,838 Other current assets 895 953 Current assets of discontinued operations 294 325 -------- -------- TOTAL CURRENT ASSETS 5,576 5,528 -------- -------- Property, plant and equipment, at cost: Land 19 19 Buildings and improvements 4,728 4,648 Machinery and equipment 6,771 6,075 Construction in progress 80 114 -------- -------- 11,598 10,856 Less accumulated depreciation and amortization 7,076 6,763 -------- -------- 4,522 4,093 Other assets 1,506 1,548 Other assets of discontinued operations 1,080 1,458 -------- -------- $ 12,684 $ 12,627 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term debt $ 938 $ 858 Current portion of long-term debt and leases 305 377 Accounts payable 2,174 1,593 Accrued expenses 2,160 1,940 Current liabilities of discontinued operations 484 527 -------- -------- TOTAL CURRENT LIABILITIES 6,061 5,295 -------- -------- Long-term debt and leases 2,415 2,730 Other long-term liabilities 1,176 1,730 STOCKHOLDERS' EQUITY: Common stock 3,692 3,520 Additional paid-in capital 29,260 29,221 Accumulated deficit (26,793) (26,671) Accumulated other comprehensive loss (1,530) (1,602) -------- -------- 4,629 4,468 Less cost of treasury shares 1,597 1,596 -------- -------- TOTAL STOCKHOLDERS' EQUITY 3,032 2,872 -------- -------- $ 12,684 $ 12,627 ======== ========
See notes to consolidated financial statements. 4
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS ------------------------------------------------------------ (in thousands of dollars, except per share data) (unaudited) Quarter Ended June 30, --------------------------------- 2002 2001 ---- ---- NET SALES $ 5,551 $ 7,003 ------- ------- Cost and expenses: Cost of sales 3,429 4,410 Selling, shipping and advertising 838 902 General and administrative 1,025 1,093 Depreciation and amortization 164 192 ------- ------- 5,456 6,597 ------- ------- EARNINGS FROM OPERATIONS 95 406 ------- ------- Other expense: Interest expense 83 142 Other-net 23 30 ------- ------- 106 172 ------- ------- EARNINGS (LOSS) BEFORE INCOME TAX PROVISION (BENEFIT) (11) 234 Income tax provision (benefit) (13) 66 ------- ------- NET EARNINGS $ 2 $ 168 ======= ======= NET EARNINGS PER COMMON SHARE: Basic $ 0.00 $ 0.05 ======= ======= Diluted $ 0.00 $ 0.05 ======= =======
See notes to consolidated financial statements 5
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS ----------------------------------------------------------- (in thousands of dollars, except per share data) (unaudited) Six Months Ended June 30, ---------------------------- 2002 2001 ---- ---- NET SALES $11,312 $13,161 ------- ------- Cost and expenses: Cost of sales 6,966 8,196 Selling, shipping and advertising 1,696 1,799 General and administrative 2,082 2,085 Depreciation and amortization 319 378 ------- ------- 11,063 12,458 ------- ------- EARNINGS FROM CONTINUING OPERATIONS BEFORE INTEREST AND OTHER ITEMS 249 703 ------- ------- Other expense: Interest expense-net 173 301 Other-net 48 59 ------- ------- 221 360 ------- ------- EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 28 343 Income tax provisions-net 13 108 ------- ------- EARNINGS FROM CONTINUING OPERATIONS 15 235 Earnings from discontinued operations (net of tax provisions of $115) 170 -- ------- ------- NET EARNINGS $ 185 $ 235 ======= ======= EARNINGS PER COMMON SHARE: Basic: Earnings from continuing operations $ 0.00 $ 0.06 Earnings from discontinued operations 0.05 0.00 ------- ------- Net earnings $ 0.05 $ 0.06 ======= ======= Diluted: Earnings from continuing operations $ 0.00 $ 0.06 Earnings from discontinued operations 0.05 0.00 ------- ------- Net earnings $ 0.05 $ 0.06 ======= =======
See notes to consolidated financial statements. 6
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------------------------- (in thousands of dollars, except per share data) (unaudited) Six Months Ended June 30, ------------------------ 2002 2001 ---- ---- Cash Flows from Operating Activities: Net earnings $ 185 $ 235 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 319 378 Deferred income tax expenses 107 112 Increase in cash from changes in current assets and current liabilities 375 97 Net change in pension-related accounts (66) 121 Discontinued operations 241 (76) Other 11 19 ------- ------- Net cash provided by operating activities 1,172 886 ------- ------- Cash Flows from Investing Activities: Net cash used in investing activities, capital expenditures (734) (385) ------- ------- Cash Flows from Financing Activities: Proceeds from short-term debt 98 183 Payments of preferred dividends (71) -- Payments of short-term debt (18) (264) Payments of long-term debt (372) (226) Payments of long-term lease obligations (15) (14) Other (24) (24) ------- ------- Net cash used in financing activities (402) (345) ------- ------- Net increase in cash and cash equivalents 36 156 Cash and cash equivalents at beginning of period 689 81 ------- ------- Cash and cash equivalents at end of period $ 725 $ 237 ======= =======
See notes to consolidated financial statements. 7 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ FOR THE QUARTER ENDED JUNE 30, 2002 (UNAUDITED) ----------------------------------------------- Note 1: ACCOUNTING POLICIES ------------------- Basis of Financial Statement Presentation - The information as of and for the three month and six month periods ended June 30, 2002 and 2001, is unaudited. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of such interim periods have been included. Discontinued Operations - In December 1989 Ronson Corporation (the "Company") adopted a plan to discontinue the operations in 1990 of one of its New Jersey facilities, Ronson Metals Corporation, subsequently renamed Prometcor, Inc. ("Prometcor"). As a result, the operations of Prometcor have been classified as discontinued operations in the accompanying Consolidated Statements of Earnings and other related operating statement data. This quarterly report should be read in conjunction with the Company's Annual Report on Form 10-K. Note 2: PER COMMON SHARE DATA --------------------- The calculation and reconciliation of Basic and Diluted Earnings per Common Share were as follows (in thousands except per share data):
Quarter Ended June 30, -------------------------------------------------------- 2002 2001 ------------------------- ----------------------------- Per Per Share Share Earnings Shares Amount Earnings Shares(2) Amt.(2) -------- ------ ------ -------- --------- ------- Net earnings . . . . . . $ 2 $ 168 Less accrued dividends on preferred stock . . . . (2) (2) -------- ------- BASIC -- 3,628 $ 0.00 166 3,629 $ 0.05 ====== ====== Effect of dilutive securities (1): Stock options . . . . . -- -- Cumulative convertible preferred stock . . . -- -- -- -- -------- ------ ------- ------ DILUTED $ -- 3,628 $ 0.00 $ 166 3,629 $ 0.05 ======== ====== ====== ======= ====== ======
8
Six Months Ended June 30, -------------------------------------------------------- 2002 2001 ------------------------- ----------------------------- Per Per Share Share Earnings Shares Amount Earnings Shares(2) Amt.(2) -------- ------ ------ -------- --------- ------- Earnings from continuing operations . . . . . . $ 15 $ 235 Less accrued dividends on preferred stock . . . . (4) (4) -------- ------- Continuing operations . . 11 3,628 $ 0.00 231 3,629 $ 0.06 Earnings from discontinued operations . . . . . . 170 3,628 0.05 -- 3,629 -- -------- ------ ------- -------- BASIC $ 181 3,628 $ 0.05 $ 231 3,629 $ 0.06 ======== ====== ====== ======= ======= ======== Effect of dilutive securities (1): Stock options . . . . . -- -- Cumulative convertible preferred stock . . . $ -- -- $ -- -- -------- ------ ------- ------ Continuing operations . . 11 3,628 $ 0.00 231 3,629 $ 0.06 Earnings from discontinued operations . . . . . . 170 3,628 0.05 -- 3,629 -- -------- ------ ------- -------- DILUTED $ 181 3,628 $ 0.05 $ 231 3,629 $ 0.06 ======== ====== ====== ======= ======= ========
(1) The assumed conversion of preferred shares to common shares and the stock options were anti-dilutive for all periods presented, and, therefore, were excluded from the computation and reconciliation of Diluted Earnings per Common Share. (2) Information as to the number of shares and per share amounts has been retroactively adjusted to reflect the 5% stock dividend on common stock. Note 3: SHORT-TERM DEBT --------------- In 1995 Ronson Consumer Products Corporation ("RCPC") entered into an agreement with Fleet Capital Corporation ("Fleet") for a Revolving Loan. On June 30, 2002, RCPC and Fleet extended RCPC's Revolving Loan to June 30, 2005. The extended agreement also amended certain other terms of the Revolving Loan agreement. The Revolving Loan of $918,000 at June 30, 2002, provides a line of credit up to $2,500,000 to RCPC based on accounts receivable and inventory. In 1995 Ronson Corporation of Canada, Ltd. ("Ronson-Canada") entered into an agreement with Canadian Imperial Bank of Commerce ("CIBC") for a line of credit of C$250,000. The Revolving Loan balance of $20,000 (C$30,000) at June 30, 2002, of Ronson-Canada under the line of credit is secured by its accounts receivable and inventory. In 1997 Ronson Aviation entered into an agreement with Fleet for a Revolving Loan. On June 30, 2002, the Revolving Loan was extended for three years to June 30, 2005. The Revolving Loan provides a line of credit up to $500,000 to Ronson 9 Aviation based on the level of its accounts receivable. At June 30, 2002, Ronson Aviation utilized no borrowings under the Revolving Loan. Note 4: LONG-TERM DEBT -------------- In May 1999 the Company, RCPC and Fleet entered into 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 $1,553,000 at June 30, 2002, and is payable in sixty monthly installments of $17,218, including interest, and a final installment on May 1, 2004. Ronson Aviation has two term loans payable to Fleet with balances at June 30, 2002, totaling approximately $1,078,000. The loans are collateralized by specific aircraft. On June 30, 2002, Ronson Aviation and Fleet amended a term loan to extend the payment terms to June 30, 2005. Note 5: CONTINGENCIES ------------- In 1999 Ronson Aviation completed the installation of a new fueling facility and ceased use of most of its former underground storage tanks. The primary underground fuel storage tanks formerly used by Ronson Aviation were removed in 1999 as required by the New Jersey Department of Environmental Protection ("NJDEP"). Related contaminated soil was removed and remediated. In 2000 initial groundwater tests were completed. Ronson Aviation's environmental consultants have advised the Company that preliminary results of that testing indicate that no further actions should be required. The extent of groundwater contamination cannot be determined until final testing has been completed and accepted by the NJDEP. The Company intends to vigorously pursue its rights under the leasehold and under the statutory and regulatory requirements. Since the amount of additional costs, if any, and their ultimate allocation cannot be fully determined at this time, the effect on the Company's financial position or results of future operations cannot yet be determined, but management believes that the effect will not be material. The Company is involved in a State of New Jersey Gross Income Tax audit for the years ended December 31, 1997 through December 31, 2000. The total claimed by the State of New Jersey is $144,000, related to availability of net operating loss carryforwards from 1995. The Company has appealed the determination by the New Jersey Division of Taxation. Based on statements of the Company's counsel in the matter, management believes that the Company will not be liable for the assessment. The Company has accrued the expected cost of defense in the matter. The Company is involved in various lawsuits, tax audits, and claims. While the amounts claimed may be substantial, the ultimate liability cannot now be determined because of the considerable uncertainties that exist. Therefore, it is possible that results of operations or liquidity in a particular period could 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. 10 Note 6: INDUSTRY SEGMENTS INFORMATION ----------------------------- The Company has two reportable segments: consumer products and aviation services. The Company's reportable segments are strategic business units that offer different products and services. Financial information by industry segment is summarized below (in thousands):
Quarter Ended Six Months Ended June 30, June 30, ------------------------ ------------------------ 2002 2001 2002 2001 ---- ---- ---- ---- Net sales: Consumer Products $ 3,394 $ 3,942 $ 7,118 $ 7,938 Aviation Services 2,157 3,061 4,194 5,223 -------- -------- -------- -------- Consolidated $ 5,551 $ 7,003 $ 11,312 $ 13,161 ======== ======== ======== ======== Earnings from operations: Consumer Products $ 232 $ 434 $ 479 $ 917 Aviation Services 358 455 749 675 -------- -------- -------- -------- Total reportable segments 590 889 1,228 1,592 Corporate and others (495) (483) (979) (889) -------- -------- -------- -------- Consolidated $ 95 $ 406 $ 249 $ 703 ======== ======== ======== ======== Earnings from continuing operations before intercompany charges and income taxes: Consumer Products $ 201 $ 385 $ 416 $ 808 Aviation Services 341 397 711 553 -------- -------- -------- -------- Total reportable segments 542 782 1,127 1,361 Corporate and others (553) (548) (1,099) (1,018) -------- -------- -------- -------- Consolidated $ (11) $ 234 $ 28 $ 343 ======== ======== ======== ========
Note 7: COMPREHENSIVE INCOME -------------------- Comprehensive Income is the change in equity during a period from transactions and other events from nonowner sources. The Company is required to classify items of other comprehensive income in financial statements and to display the accumulated balance of other comprehensive income (loss) separately in the equity section of the Consolidated Balance Sheets. 11 Changes in the components of Other Comprehensive Income (Loss) and in Accumulated Other Comprehensive Loss were as follows (in thousands): Quarter Ended June 30, 2002 and 2001 ------------------------------------ Foreign Minimum Accumulated Currency Pension Other Translation Liability Comprehensive Adjustment (1) Adjustment (2) Loss -------------- -------------- -------------- Balance at March 31, 2002 $ (71) $(1,500) $(1,571) Change in period 16 52 68 Tax Effect (6) (21) (27) Balance at -------- -------- -------- June 30, 2002 $ (61) $(1,469) $(1,530) ======== ======== ======== Balance at March 31, 2001 $ (56) $(1,015) $(1,071) Change in period 3 34 37 Tax effect (1) (13) (14) Balance at -------- -------- -------- June 30, 2001 $ (54) $ (994) $(1,048) ======== ======== ======== Six Months Ended June 30, 2002 and 2001 --------------------------------------- Foreign Minimum Accumulated Currency Pension Other Translation Liability Comprehensive Adjustment (1) Adjustment (2) Loss -------------- -------------- -------------- Balance at December 31, 2001 $ (70) $(1,532) $(1,602) Change in period 15 105 120 Tax Effect (6) (42) (48) Balance at ------- ------- -------- June 30, 2002 $ (61) $(1,469) $(1,530) ======= ======= ======= Balance at December 31, 2000 $ (58) $(1,035) $(1,093) Change in period 7 67 74 Tax Effect (3) (26) (29) Balance at ------- ------- ------- June 30, 2001 $ (54) $ (994) $(1,048) ======= ======= ======= (1) The foreign currency translation adjustment component of Accumulated Other Comprehensive Loss is presented above net of related tax benefits of $41,000 and $36,000 as of June 30, 2002 and 2001, respectively, $47,000 and $37,000 as of March 31, 2002 and 2001, respectively, and $47,000 and $39,000 as of December 31, 2001 and 2000, respectively. 12 (2) The minimum pension liability component of Accumulated Other Comprehensive Loss is presented above net of related tax benefits of $977,000 and $662,000 as of June 30, 2002 and 2001, respectively, $998,000 and $675,000 as of March 31, 2002 and 2001, respectively, and $1,019,000 and $688,000 as of December 31, 2001 and 2000, respectively.
Note 8: STATEMENTS OF CASH FLOWS ------------------------ Certificates of deposit that have a maturity of less than 90 days are considered cash equivalents for purposes of the accompanying Consolidated Statements of Cash Flows. Supplemental disclosures of cash flow information are as follows (in thousands): Six Months Ended June 30, ---------------- 2002 2001 ---- ---- Cash Payments for: Interest $ 195 $ 274 Income Taxes 2 9
13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ----------------------------------------------------------- AND RESULTS OF OPERATIONS ------------------------- RESULTS OF OPERATIONS --------------------- Second Quarter 2002 Compared to Second Quarter 2001 and First Half 2002 Compared to First Half 2001. The Company's Net Sales were $5,551,000 in the second quarter of 2002 as compared to $7,003,000 in the second quarter of 2001 and were $11,312,000 in the first half of 2002 as compared to $13,161,000 in the first half of 2001. The Company's Net Earnings in the first half of 2002 were $185,000 compared to $235,000 in the first half of 2001. The Net Earnings in the first half of 2002 included Earnings from Discontinued Operations of $170,000 due to income from an environmental insurance settlement. The Company's Earnings from Continuing Operations were $15,000 in the first half of 2002 as compared to $235,000 in the first half of 2001. Ronson Consumer Products ------------------------ (in thousands) Quarter Ended Six Months Ended June 30, June 30, -------------- ---------------- 2002 2001 2002 2001 ---- ---- ---- ---- Net sales $3,394 $3,942 $7,118 $7,938 Earnings from operations 232 434 479 917 Earnings before income taxes and intercompany charges 201 385 416 808
Net Sales of consumer products at Ronson Consumer Products Corporation ("RCPC"), Woodbridge, New Jersey, and Ronson Corporation of Canada Ltd. ("Ronson-Canada"), Mississauga, Ontario, (together "Ronson Consumer Products") decreased by 14% in the second quarter of 2002 compared to the second quarter of 2001, and the Net Sales at Ronson Consumer Products decreased by 10% in the first half of 2002 compared to the first half of 2001 primarily due to decreased sales of flame accessory products. Reclassifications have been made of certain of last year's amounts to conform with the current year's presentation required in accordance with EITF Issue No. 00-25. Effective January 1, 2002, certain selling expenses incurred by Ronson Consumer Products are classified as reductions in Net Sales, in lieu of as selling or advertising expenses. There is no effect on earnings, and the impact on Ronson Consumer Products' Net Sales is not material. Cost of Sales, as a percentage of Net Sales, at Ronson Consumer Products increased to 58% in the second quarter of 2002 from 56% in the second quarter of 2001 and to 59% in the first half of 2002 from 56% in the first half of 2001. These increases in the Cost of Sales percentage was due primarily to the lower sales and to increased packaging costs on certain products. Selling, Shipping and Advertising Expenses at Ronson Consumer Products, as a percentage of Net Sales, increased to 25% in the second quarter of 2002 and to 24% in the first half of 2002 from 23% in the second quarter and first half of 2001 primarily due to the lower sales in 2002. General and Administrative Expenses, as a percentage of Net Sales, were unchanged at 9% in the second quarters and first halves of 2002 and 2001. 14
Interest Expense at Ronson Consumer Products was reduced by $16,000 to $27,000 in the second quarter of 2002 from $43,000 in the second quarter of 2001 and by $42,000 to $55,000 in the first half of 2002 from $97,000 in the first half of 2001 primarily due to lower interest rates. Ronson Aviation --------------- (in thousands) Quarter Ended Six Months Ended June 30, June 30, --------------- ---------------- 2002 2001 2002 2001 ---- ---- ---- ---- Net sales $2,157 $3,061 $4,194 $5,223 Earnings from operations 358 455 749 675 Earnings before income taxes and intercompany charges 341 397 711 553
Net Sales at Ronson Aviation, Inc. ("Ronson Aviation"), Trenton, New Jersey, decreased by 30% in the second quarter of 2002 from the second quarter of 2001 and by 20% in the first half of 2002 from the first half of 2001. These decreases were primarily due to lower aircraft sales and because the Net Sales in the second quarter and first half of 2001 included sales of charter services on Ronson Aviation's two C-99 aircraft, which were sold in the fourth quarter of 2001. Ronson Aviation's Cost of Sales, as a percentage of Net Sales, was reduced to 68% in the second quarter of 2002 and to 66% in the first half of 2002 from 73% in the second quarter and first half of 2001. The decreases in the Cost of Sales percentage in 2002 were primarily due to improved gross profit margins on certain products and to the change in the mix of products sold. Ronson Aviation's Selling, Shipping and Advertising Expenses and General and Administrative Expenses, as a percentage of Net Sales, increased to 11% in the second quarter of 2002 from 9% in the second quarter of 2001 and to 12% in the first half of 2002 from 10% in the first half of 2001 primarily due to the lower sales in 2002. Interest Expense at Ronson Aviation was reduced by $39,000 to $18,000 in the second quarter of 2002 from $57,000 in the second quarter of 2001 and by $81,000 to $39,000 in the first half of 2002 from $120,000 in the first half of 2001 primarily due to lower interest rates in 2002 and to reduced debt because of the fourth quarter 2001 sale of the two C-99 aircraft. Other Items ----------- The General and Administrative Expenses of Corporate and Other were higher in the second quarter and first half of 2002 as compared to the second quarter and first half of 2001 primarily due to significantly higher pension expense as the result of increased amortization related to the lower valuation of pension assets in 2001. Income Taxes ------------ Income tax benefits were recognized in the second quarter of 2002 because earnings in the second quarter 2002 in Ronson-Canada offset its losses in the first quarter 2002. In the first half of 2002, the Company's 15 effective tax rate of 46% exceeded the statutory tax rate due to minimum state income taxes. Discontinued Operations ----------------------- On March 6, 2002, the Company reached settlement with the last insurance carrier in the Company's 1999 lawsuit to recover incurred and anticipated environmental cleanup costs, primarily relating to the Company's discontinued Prometcor operations. The Company had settled with the other insurance carriers in 2000 and 2001. This last settlement amounted to $600,000, bringing total recoveries to over $1.8 million. As a result of this final settlement, the Company had Earnings from Discontinued Operations of $285,000 after related expenses and before income taxes ($170,000 after taxes) in the first half of 2002. FINANCIAL CONDITION The Company's Stockholders' Equity improved to $3,032,000 at June 30, 2002, from $2,872,000 at December 31, 2001. The improvement of $160,000 in Stockholders' Equity was primarily due to the Net Earnings in the first half of 2002. The Company had a deficiency in working capital of $485,000 at June 30, 2002, as compared to working capital of $233,000 at December 31, 2001. The decline in working capital was primarily due to three factors: a reduction in the long-term pension obligation by $576,000, Ronson Aviation's replacement of an engine on its Citation II charter aircraft of about $400,000 and a reduction in the non-current portion of long-term debt of $299,000, partially offset by the Company's Net Earnings in the first half of 2002. In the first half of 2002, the Company's machinery and equipment increased by $696,000 primarily due to Ronson Aviation's replacement of an engine on its Citation II charter aircraft at a cost of about $400,000. In the first half of 2002, the Company's Accounts Payable and Accrued Expenses increased from December 31, 2001, primarily due to the timing of purchases and payments. In the first quarter of 2002, the Company completed the environmental clearance of Prometcor's Newark, NJ, property. The property was released for sale in March 2002 by the New Jersey Department of Environmental Protection. Closing on the sale of the property under an existing sale agreement was completed in the second quarter of 2002. The reduction in Other Assets of Discontinued Operations from December 31, 2001, to June 30, 2002, was primarily due to the sale of the property. In the second quarter of 2002, the Company reached agreement with its principal lender, Fleet Business Capital ("Fleet") extending: 1) Fleet's lines of credit with RCPC and Ronson Aviation, and 2) certain of Fleet's term loans to Ronson Aviation related to the Citation II jet. The lines of credit and term loans were extended by three years from their prior expiration dates to June 30, 2005. The revised terms of the agreements provide for reduced interest rates to prime plus 1% from prime plus 1-1/2%. For the lines of credit, these rate reductions are upon attainment of certain financial ratios. The revised agreements also eliminate and revise various financial covenants. The Company has continued to meet its obligations as they have matured and management believes that the Company will continue to meet its obligations 16 through internally generated funds from future net earnings and depreciation, established external financial arrangements, potential additional sources of financing and existing cash balances. FORWARD-LOOKING STATEMENTS -------------------------- This Management's Discussion and Analysis of Financial Condition and Results of Operations and other sections of this report contain forward-looking statements that anticipate results based on management's plans that are subject to uncertainty. The use of the words "expects", "plans", "anticipates" and other similar words in conjunction with discussions of future operations or financial performance identifies these statements. Forward-looking statements are based on current expectations of future events. The Company cannot ensure that any forward-looking statement will be accurate, although the Company believes that it has been reasonable in its expectations and assumptions. Investors should realize that if underlying assumptions prove inaccurate or that unknown risks or uncertainties materialize, actual results could vary materially from our projections. The Company assumes no obligation to update any forward-looking statements as a result of future events or developments. Investors are cautioned not to place undue reliance on such statements that speak only as of the date made. Investors also should understand that it is not possible to predict or identify all such factors and should not consider this to be a complete statement of all potential risks and uncertainties. 17 PART II - OTHER INFORMATION ITEM 1: LEGAL PROCEEDINGS. Gary & Margaret Minnich vs. Ronson Consumer Products Corporation and -------------------------------------------------------------------- Wal-Mart Stores East, Inc. -------------------------- The Company is the defendant in a product liability lawsuit pending in the Circuit Court for Washington County, Maryland, in which Plaintiffs seek substantial damages that allegedly occurred in February 1999, when a cigarette lighter ignited the clothing of Gary Minnich. The Company was notified of the lawsuit in June 2002. Discovery has not been completed, and, therefore, the Company's counsel is unable to render an opinion about whether the likelihood of an unfavorable outcome is either "probable" or "remote". However, counsel for the Company has advised that substantial defenses exist and is vigorously defending this litigation. Management believes that the claim is without merit and a loss, if any, would be well within the limits of insurance coverage. ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. (10) Material Contracts. On June 30, 2002, RCPC and Summit Business Capital Corp., doing business as Fleet Capital ("Fleet"), amended the Revolving Loan agreement (refer to Note 3 of the Notes to Consolidated Financial Statements). The amended Revolving Loan agreement and related agreements are attached as Exhibits 10(a)-10(d) as follows: (a) Fourth Amendment to Loan and Security Agreement between Summit Business Capital Corp. and Ronson Consumer Products Corporation dated June 30, 2002. (b) Amended and Restated Master Note in the amount of $2,500,000 between Summit Business Capital Corp. and Ronson Consumer Products Corporation dated June 30, 2002. (c) Consent and Reaffirmation of Guarantor by Ronson Corporation to Summit Business Capital Corp. dated June 30, 2002. (d) Consent and Reaffirmation of Guarantor by Ronson Aviation, Inc. to Summit Business Capital Corp. dated June 30, 2002. On June 30, 2002, Ronson Aviation and Fleet amended the Revolving Loan Agreement and a Term Loan Agreement (refer to Notes 3 and 4 of the Notes to Consolidated Financial Statements). The amended Revolving Loan Agreement, the Term Loan Agreement and related agreements are attached hereto as Exhibits 10(e)-10(i) as follows: (e) Second Amendment to Loan and Security Agreement between Summit Business Capital Corp. and Ronson Aviation, Inc. dated June 30, 2002. (f) Third Amended and Restated Master Note in the amount of $500,000 between Summit Business Capital Corp. and Ronson Aviation, Inc. dated June 30, 2002. (g) Allonge to Promissory Note dated November 20, 1997 in the sum of $1,726,725.00 as of June 30, 2002, between Summit Business Capital Corp. and Ronson Aviation, Inc. 18 (h) Consent and Reaffirmation of Guarantor by Ronson Corporation to Summit Business Capital Corp. dated June 30, 2002. (i) Consent and Reaffirmation of Guarantor by Ronson Consumer Products Corporation to Summit Business Capital Corp. dated June 30, 2002. (b) Reports on Form 8-K. None. 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RONSON CORPORATION Date: August 14, 2002 /s/ Louis V. Aronson II ------------------------------------ Louis V. Aronson II, President & Chief Executive Officer (Signing as Duly Authorized Officer of the Registrant) Date: August 14, 2002 /s/ Daryl K. Holcomb ------------------------------------ Daryl K. Holcomb, Vice President & Chief Financial Officer, Controller & Treasurer (Signing as Chief Financial Officer of the Registrant)