-----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, EWfxVy5spjI+JqkQVWrQQhF3Dy9qhxevS+nZbDyffKVuUv8u9uq+w+rNpyjp0JY8 AI/oNb302W4ZdHIB1JcjvQ== 0000914317-06-001657.txt : 20060525 0000914317-06-001657.hdr.sgml : 20060525 20060525134559 ACCESSION NUMBER: 0000914317-06-001657 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20060331 FILED AS OF DATE: 20060525 DATE AS OF CHANGE: 20060525 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-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-01031 FILM NUMBER: 06866603 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-Q/A 1 form10qa-77091_ronc.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549-1004 FORM 10-Q/A QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2006 -------------- Commission File Number 1-1031 ------ RONSON CORPORATION - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New Jersey 22-0743290 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Corporate Park III-Campus Drive, P.O. Box 6707, Somerset, NJ 08875 ------------------------------------------------------------------ (Address of principal executive offices) (732) 469-8300 ------------------------------------------------------------------ (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [_] No [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [_] No [X] As of May 1, 2006, there were 4,536,249 shares of the registrant's common stock outstanding. RONSON CORPORATION FORM 10-Q INDEX --------------- PAGE ---- PART I - FINANCIAL INFORMATION: ITEM 1 - FINANCIAL STATEMENTS: CONSOLIDATED BALANCE SHEETS: MARCH 31, 2006 AND DECEMBER 31, 2005 3 CONSOLIDATED STATEMENTS OF OPERATIONS: QUARTER ENDED MARCH 31, 2006 AND 2005 4 CONSOLIDATED STATEMENTS OF CASH FLOWS: QUARTER ENDED MARCH 31, 2006 AND 2005 5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12 ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 15 ITEM 4 - CONTROLS AND PROCEDURES 15 PART II - OTHER INFORMATION: ITEM 1 - LEGAL PROCEEDINGS 15 ITEM 6 - EXHIBITS 19 SIGNATURES 20 PART 1 - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES CONSOLIDATED BALANCE SHEETS --------------------------- (in thousands of dollars)
March 31, December 31, 2006 2005 ------------ ------------ (unaudited) ASSETS ------ CURRENT ASSETS: Cash and cash equivalents $ 697 $ 414 Accounts receivable, net 2,166 1,832 Inventories: Finished goods 1,722 1,625 Work in process 3 22 Raw materials 900 908 ------------ ------------ 2,625 2,555 Other current assets 1,969 1,072 ------------ ------------ TOTAL CURRENT ASSETS 7,457 5,873 Property, plant and equipment, at cost: Land 6 6 Buildings and improvements 5,399 5,374 Machinery and equipment 6,560 6,515 Construction in progress 631 555 ------------ ------------ 12,596 12,450 Less accumulated depreciation and amortization 8,483 8,335 ------------ ------------ 4,113 4,115 Other Assets 2,643 2,666 ------------ ------------ $ 14,213 $ 12,654 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Short-term debt $ 1,550 $ 1,500 Current portion of long-term debt and leases 1,526 407 Accounts payable 2,763 2,134 Accrued expenses 2,526 2,592 Deferred revenue 957 -- ------------ ------------ TOTAL CURRENT LIABILITIES 9,322 6,633 Long-term debt and leases 1,247 2,468 Other long-term liabilities 248 249 STOCKHOLDERS' EQUITY: Common stock 4,617 4,617 Additional paid-in capital 29,712 29,724 Accumulated deficit (27,817) (27,895) Accumulated other comprehensive loss (1,519) (1,545) ------------ ------------ 4,993 4,901 Less cost of treasury shares 1,597 1,597 ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 3,396 3,304 ------------ ------------ $ 14,213 $ 12,654 ============ ============
3 See note to consolidated financial statements. RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS ------------------------------------- (in thousands of dollars, except per share data) (Unaudited) Quarter Ended March 31, ---------------------- 2006 2005 ------- ------- NET SALES $ 7,342 $ 6,437 ------- ------- Cost and expenses: Cost of sales 4,988 4,290 Selling, shipping and advertising 918 912 General and administrative 963 982 Depreciation and amortization 153 219 Other charges 30 -- ------- ------- 7,052 6,403 ------- ------- EARNINGS FROM OPERATIONS 290 34 ------- ------- Other expense: Interest expense 101 99 Other-net 58 76 ------- ------- 159 175 ------- ------- EARNINGS (LOSS) BEFORE INCOME TAXES 131 (141) Income tax provision (benefit) 53 (53) ------- ------- NET EARNINGS (LOSS) $ 78 $ (88) ======= ======= EARNINGS (LOSS) PER COMMON SHARE: Basic $ 0.02 $ (0.02) ======= ======= Diluted $ 0.02 $ (0.02) ======= ======= 4 See note to consolidated financial statements.
RONSON CORPORATION AND ITS WHOLLY OWNED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (in thousands of dollars) (Unaudited) Quarter Ended March 31, --------------------- 2006 2005 ---- ---- Cash Flows from Operating Activities: Net earnings (loss) $ 78 $ (88) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization 153 219 Deferred income tax expense (benefit) 16 (59) Increase (decrease) in cash from changes in: Current assets and current liabilities 487 302 Other non-current assets and other long-term liabilities (19) 16 Net change in pension-related accounts (203) (214) Effect of exchange rate changes (18) (4) -------- -------- Net cash provided by operating activities 494 172 -------- -------- Cash Flows from Investing Activities: Net cash used in investing activities, capital expenditures (147) (234) -------- -------- Cash Flows from Financing Activities: Proceeds from short-term debt 250 -- Payments of short-term debt (200) (131) Payments of long-term debt (39) (84) Payments of long-term lease obligations (63) (62) Payments of dividends -- (41) Cost of stock option agreement (12) (12) -------- -------- Net cash used in financing activities (64) (330) -------- -------- Net increase (decrease)in cash and cash equivalents 283 (392) Cash and cash equivalents at beginning of period 414 599 -------- -------- Cash and cash equivalents at end of period $ 697 $ 207 ======== ========
5 See note to consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ FOR THE QUARTER ENDED MARCH 31, 2006 (UNAUDITED) ------------------------------------------------ Note 1: ACCOUNTING POLICIES ------------------- Basis of Financial Statement Presentation - The information as of and for the three month periods ended March 31, 2006 and 2005, is unaudited. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the results of such interim periods have been included. This quarterly report should be read in conjunction with the Company's Annual Report on Form 10-K. Certain reclassifications of prior year's amounts have been made to conform with the current year's presentation. New Authoritative Accounting Pronouncements - The Company does not anticipate the adoption of recently issued accounting pronouncements to have a significant impact on the Company's results of operations, financial position or cash flows. Note 2: PER COMMON SHARE DATA --------------------- The calculation and reconciliation of Basic and Diluted Earnings (Loss) per Common Share were as follows (in thousands except per share data):
Quarter Ended March 31, 2006 2005 ------------------------------ ------------------------------- Per Per Share Share Earnings Shares Amount Loss Shares(2) Amount -------- -------- -------- -------- -------- -------- BASIC $ 78 4,536 $ .02 $ (88) 4,321 $ (.02) ======== ======== ======== ======== Effect of dilutive securities: Stock options (1) 51 -------- DILUTED $ 78 4,587 $ .02 $ (88) 4,321 $ (.02) ======== ======== ======== ======== ======== ========
(1) Stock options were anti-dilutive for the three months ended March 31, 2005, and, therefore, were excluded from the computation and reconciliation of Diluted Earnings (Loss) per Common Share for that period. (2) Information as to the number of shares and per share amounts has been retroactively adjusted to reflect the 5% stock dividend on common stock declared February 23, 2006. Note 3: SHORT-TERM DEBT --------------- In 1995 Ronson Consumer Products Corporation ("RCPC") entered into an agreement with Bank of America for a Revolving Loan, now extended to January 31, 2007. The Revolving Loan with a balance of $1,550,000 at March 31, 2006, 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. Ronson-Canada's line of credit is secured by its accounts receivable 6 and inventory. At March 31, 2006, Ronson-Canada utilized no borrowings under the Revolving Loan. In 1997 Ronson Aviation, Inc. ("Ronson Aviation") entered into an agreement with Bank of America for a Revolving Loan. The Revolving Loan provides a line of credit up to $500,000 to Ronson Aviation based on the level of its accounts receivable. At March 31, 2006, Ronson Aviation utilized no borrowings under the Revolving Loan. Note 4: LONG-TERM DEBT -------------- On December 1, 2003, the Company, RCPC and Bank of America amended the Company's Mortgage Loan, extending the expiration to December 1, 2008. On January 11, 2006, the Company, RCPC and Bank of America amended the mortgage loan to expire January 31, 2007. The Mortgage Loan balance was $1,216,000 at March 31, 2006. The Mortgage Loan agreement is secured by a first mortgage on the land, buildings and improvements of RCPC, and is payable in monthly installments of $7,951, plus interest, with a final installment on January 31, 2007, of approximately $1,137,000. The loan bears interest at the rate of 0.5% above Bank of America's prime rate. In March 2004 a lease agreement became effective for a warehouse facility utilized by RCPC for finished goods storage and product shipments. In connection with the lease, the landlord provided improvements totaling $440,000. The landlord provided RCPC with a long-term loan for the improvements, bearing interest at 8.25%, payable at $4,800 per month, including interest, with a final payment of $150,000 due at the end of the initial nine-year term, and secured by a letter of credit in the amount of $150,000. At March 31, 2006, the total balance payable on this lease agreement was $391,000. Note 5: CONTINGENCIES ------------- In December 1989 the Company adopted a plan to discontinue the operations of its wholly owned subsidiary, Ronson Metals Corporation, subsequently renamed Prometcor, Inc. ("Prometcor"). Upon the cessation of operations, Prometcor began its compliance with the environmental requirements of all applicable laws with the objective of selling the property previously used in the discontinued operations. The full extent of the costs and the time required for the completion is not determinable until the remediation, if any is required, and confirmatory testing related to the remaining groundwater matter have been completed and accepted by the New Jersey Department of Environmental Protection ("NJDEP"). The liability for these estimated costs and expenses as recorded in the financial statements at March 31, 2006 and December 31, 2005 was approximately $500,000 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. 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 the preliminary results of that testing indicated 7 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 shareholder derivative lawsuit filed in 2003 and a second lawsuit against the Company's directors and chief financial officer filed in April 2005, both filed by the same shareholder. The Company has incurred a total of approximately $730,000 in net legal costs related to the matter in 2003, 2004, 2005, and in the three months ended March 31, 2006. These costs are net of the associated insurance reimbursements. The Company believes that its directors' and officers' liability insurance coverage is adequate to meet the future direct costs of the litigation, however, the Company is not able to estimate, at this time, the extent to which it will incur additional legal or other expenses, which may be substantial, in connection with these proceedings. 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. 8 Financial information by industry segment is summarized below (in thousands): Quarter Ended March 31, ------------------ 2006 2005 ------- ------- Net sales: Consumer Products $ 4,176 $ 3,915 Aviation Services 3,166 2,522 ------- ------- Consolidated $ 7,342 $ 6,437 ======= ======= Earnings from operations: Consumer Products $ 383 $ 244 Aviation Services 356 253 ------- ------- Total reportable segments 739 497 Corporate and others (419) (463) Other charges (30) -- ------- ------- Consolidated $ 290 $ 34 ======= ======= Earnings (loss) before intercompany charges and income taxes: Consumer Products $ 340 $ 189 Aviation Services 357 244 ------- ------- Total reportable segments 697 433 Corporate and others (536) (574) Other charges (30) -- ------- ------- Consolidated $ 131 $ (141) ======= ======= Note 7: COMPREHENSIVE INCOME -------------------- Comprehensive Income is the change in equity during a period from transactions and other events from non-owner sources. The Company is required to classify items of other comprehensive income in financial statements and to display the accumulated balance of other comprehensive (income) loss separately in the equity section of the Consolidated Balance Sheets. 9 Changes in the components of Other Comprehensive (Income) Loss and in Accumulated Other Comprehensive Loss were as follows (in thousands):
Quarter Ended March 31, 2006 and 2005 ------------------------------------- Foreign Currency Minimum Cash Flow Accumulated Other Translation Pension Hedging Comprehensive Adjustments Liability Adjustments Loss ------------ ------------ ------------ ------------ Balance at December 31, 2005 $ (61) $ 1,619 $ (13) $ 1,545 Current period change 30 (64) (10) (44) Income tax expense (12) 26 4 18 ------------ ------------ ------------ ------------ Balance at March 31, 2006 $ (43) $ 1,581 $ (19) $ 1,519 ============ ============ ============ ============ Balance at December 31, 2004 $ (51) $ 1,482 $ 10 $ 1,441 Current period change 6 (56) (27) (77) Income tax expense (2) 22 10 30 ------------ ------------ ------------ ------------ Balance at March 31, 2005 $ (47) $ 1,448 $ (7) $ 1,394 ============ ============ ============ ============
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): Quarter Ended March 31, --------------- 2006 2005 ------ ------ Cash Payments for: Interest $ 92 $ 91 Income Taxes -- -- Financing & Investing Activities Not Affecting Cash: Capital lease obligations incurred -- 64 Note 9: RETIREMENT PLANS ---------------- The Company's Consolidated Statements of Operations included pension expense consisting of the following components (in thousands): Quarter Ended March 31, -------------------- 2006 2005 -------- -------- Service cost $ 8 $ 6 Interest cost 66 66 Expected return on plan assets (48) (48) Recognized actuarial losses 64 56 Recognized prior service cost 2 2 -------- -------- Net pension expense $ 92 $ 84 ======== ======== 10 Contributions to the pension plan during 2006 are expected as follows (in thousands): Paid in the three months ended March 31, 2006 $ 289 Expected to be paid in the balance of 2006 451 ----- Total expected to be paid in the year ending December 31, 2006 $ 740 ===== Note 10: FAIR VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS ---------------------------------------------- In December 2003 the Company entered into an interest rate swap agreement in order to manage interest rate exposure. Effectively, the Company converted its Mortgage Loan payable of variable-rate debt to fixed-rate debt with an effective interest rate of 7.45%. The interest rate swap is considered a cash flow hedge and is 100% effective. As a result, the mark-to-market value of both the fair value hedging instrument and the underlying debt obligation are recorded as equal and offsetting gains or losses in other expense. At March 31, 2006, the interest rate swap had a fair value of $32,000 recorded in Other Assets with the corresponding adjustment to Accumulated Other Comprehensive Loss. The fair value of the interest rate swap agreement, obtained from the financial institution, is based on current rates of interest and is computed as the net present value of the remaining exchange obligations under the terms of the contract. Mr. Carl W. Dinger III has granted an option to the Company to purchase the 535,222 shares now held by Mr. Dinger at an exercise price of $5.90 per share. The cost of the option is $4,000 per month for the period of the option or until exercised. At March 31, 2006, the fair value of the option was approximately $502,000, using the Black-Scholes option pricing model. Key assumptions included: a risk-free interest rate of 4.80%, a dividend yield of 0.00%, volatility of 63.8%, and the option life of 1.25 years. The fair value of $502,000 compares to $57,000, the present value of the 15 remaining payments under the contract, discounted at the Company's incremental borrowing rate of 8.0%. (Refer to Note 14 of Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2005.) 11 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS First Quarter 2006 Compared to First Quarter 2005. The Company's Net Sales increased by 14% to $7,342,000 in the first quarter of 2006 as compared to $6,437,000 in the first quarter of 2005. Net Sales increased at both Ronson Consumer Products Corporation and Ronson Aviation, Inc., the Company's wholly-owned subsidiaries. The Company's Earnings from Operations in the first quarter of 2006 improved to $290,000 from $34,000 in the first quarter of 2005, an increase of $256,000. The Company's Net Earnings of $78,000 in the first quarter of 2006 were a reversal from a Net Loss of $88,000 in the first quarter of 2005, an improvement of $166,000. Ronson Consumer Products - ------------------------ (in thousands) Quarter Ended March 31, --------------- 2006 2005 ------ ------ Net sales $4,176 $3,915 Earnings from operations 383 244 Earnings before income taxes and intercompany charges 340 189 Net Sales of consumer products at Ronson Consumer Products Corporation ("RCPC"), Woodbridge, New Jersey, and Ronson Corporation of Canada Ltd. ("Ronson-Canada"), Mississauga, Ontario, (together "Ronson Consumer Products") increased by 7% in the first quarter of 2006 as compared to the first quarter of 2005, primarily due to increased sales of the Company's Jet Lite and Comet lighters. This increase of 7% consisted of an increase of about 9% due to higher volume of products sold, partially offset by a decrease of about 2% due to reduced average net selling prices. Cost of Sales, as a percentage of Net Sales, at Ronson Consumer Products decreased to 59% in the first quarter of 2006 from 60% in the first quarter of 2005 due primarily to increased volume of products sold. The amount of the Cost of Sales increased by about 5%, consisting of an increase of 2% in the unit costs of products sold due primarily to higher cost of fuels as a result of higher oil prices and related raw materials, and by an increase of 5% due to higher sales volume, partially offset by a decrease of 3% due to reduced manufacturing costs. Selling, Shipping and Advertising Expense at Ronson Consumer Products, as a percentage of Net Sales, decreased to 22% in the first quarter of 2006 from 23% in the first quarter of 2005 primarily due to the increased sales in the first quarter of 2006. General and Administrative Expenses, as a percentage of Net Sales, were 8% in the first quarters of both 2006 and 2005. 12 Ronson Aviation - --------------- (in thousands) Quarter Ended March 31, --------------- 2006 2005 ------ ------ Net sales $3,166 $2,522 Earnings from operations 356 253 Earnings before income taxes and intercompany charges 357 244 Net Sales at Ronson Aviation, Inc. ("Ronson Aviation"), Trenton, New Jersey, increased by 26% in the first quarter of 2006 from the first quarter of 2005 primarily due to the sale of an aircraft in the first quarter of 2006 (none in the first quarter of 2005). Ronson Aviation's Cost of Sales, as a percentage of Net Sales, increased to 80% in the first quarter of 2006 from 77% in the first quarter of 2005. The increase in the Cost of Sales percentage in 2006 was primarily due to a change in the mix of products sold and to increased cost of fuel due to increased cost of oil. Ronson Aviation's Selling, Shipping and Advertising Expenses and General and Administrative Expenses were reduced to 8% in the first quarter of 2006 compared to 9% in the first quarter of 2005 primarily due to the increased sales in 2006. Other Items - ----------- The Other Charges in the first quarter of 2006 of $30,000 were the legal fees incurred related to stockholder litigation. (Refer to Item 1 of Part II of this Form 10-Q.) FINANCIAL CONDITION The Company's Stockholders' Equity increased to $3,396,000 at March 31, 2006, from $3,304,000 at December 31, 2005. The increase of $92,000 in Stockholders' Equity was primarily due to the Net Earnings in the first quarter of 2006. The Company had a deficiency in working capital of $1,865,000 at March 31, 2006, as compared to $760,000 at December 31, 2005. The decline in working capital was primarily due to the classification as Current Portion of Long-term Debt of $1,145,000 from Long-term Debt at March 31, 2006, because of the January 31, 2007 due date of RCPC's mortgage loan with Bank of America. The Bank of America lines of credit with RCPC and Ronson Aviation had been scheduled to expire on December 31, 2005. On January 11, 2006, Bank of America and the Company extended these lines of credit to January 31, 2007. The extension included a covenant providing for a minimum consolidated earnings before interest, taxes, depreciation, and amortization ("EBITDA"), and for fees payable to the bank monthly beginning February 28, 2006, if the loans remain outstanding at the end of the month. Bank of America and the Company do not expect a further extension of the lines of credit. The Company is actively engaged in discussions with other financial institutions to replace Bank of America as the Company's primary lender in the next several months. The extension agreement also provided that the expiration date of the mortgage loan between Bank of America and RCPC, which had been due to expire on December 1, 2008, was changed to January 31, 2007 to coincide with the expiration date of the lines of credit. The Company expects that the new financing being discussed will include a new long-term mortgage loan. This will 13 provide an improvement in working capital by the amount of the mortgage due in over one year, reversing the reduction in working capital of $1,145,000 discussed above. Based on the amount of the loans outstanding and the levels of accounts receivable and inventory at March 31, 2006, Ronson Consumer Products had unused borrowings available at March 31, 2006 of about $234,000 under the Bank of America and Canadian Imperial Bank of Commerce lines of credit. Based on the level of accounts receivable, Ronson Aviation had unused borrowings of about $282,000 under the Bank of America line of credit at March 31, 2006. In the first quarter of 2006, Ronson Consumer Products shipped Ronsonol lighter fluid and Multi-Fill butane fuel to a customer in the People's Republic of China. The shipment arrived in April 2006. Therefore, the sale of $957,000, related costs, and profit contribution will be included in the Company's Statements of Operations in the second quarter of 2006. At March 31, 2006 the amount of this sale is classified as Deferred Revenue in Current Liabilities and the cost of the goods is included in Other Current Assets. In the first quarter of 2006, the Company's Accounts Payable increased primarily due to materials purchased to fill consumer products orders and due to cash of $289,000 required to meet required contributions to the Company's defined benefit pension plan. On February 23, 2006, the Company's Board of Directors declared a 5% stock dividend on the Company's common stock. The 5% stock dividend was issued on April 15, 2006, to stockholders of record April 1, 2006. Information as to the number of shares and per share amounts has been retroactively adjusted to reflect this stock dividend. The Company has continued to meet its obligations as they have matured and management believes that the Company will continue to meet its obligations through internally generated funds from future net earnings and depreciation, established external financial arrangements, potential additional sources of financing and existing cash balances. FORWARD-LOOKING STATEMENTS This Management's Discussion and Analysis of Financial Condition and Results of Operations and other sections of this report contain forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including any projections of earnings, revenue, margins, costs or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statement concerning new products, services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. The risks, uncertainties and assumptions referred to above include the success of new products; competition; prices of key materials, such as petroleum products; the challenge of managing asset levels, including inventory; the difficulty of aligning expense levels with revenue changes; assumptions relating to pension costs; and other risks that are described herein and that are otherwise described from time to time in the 14 Company's Securities and Exchange Commission reports. The Company assumes no obligation and does not intend to update these forward-looking statements. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ---------------------------------------------------------- There has been no significant change in the Company's exposure to market risk during the first three months of 2006. For discussion of the Company's exposure to market risk, refer to Item 7A, Quantitative and Qualitative Disclosure about Market Risk, contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2005, incorporated herein by reference. ITEM 4 - CONTROLS AND PROCEDURES ----------------------- (a) Evaluation of Disclosure Controls and Procedures. The Company's Chief Executive Officer and Chief Financial Officer, after the evaluation of the effectiveness of the Company's "disclosure controls and procedures" (as defined in Rules 13a-4(c) and 15-14(c) under the Securities Exchange Act of 1934) as of the end of the period covered by this quarterly report, have concluded that, as of the end of the period covered by this quarterly report, the Company's disclosure controls and procedures were adequate, are designed to ensure that material information related to the Company and its consolidated subsidiaries would be made known to the above officers, are effective and provide reasonable assurance that they will meet their objectives. (b) Changes in Internal Controls. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS ----------------- 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. Steel Partners II, L.P., et al v. Louis V. Aronson II, Robert A. Aronson, - -------------------------------------------------------------------------- Erwin M. Ganz, I. Leo Motiuk, Gerard J. Quinnan, Justin P. Walder, - ------------------------------------------------------------------- Saul H. Weisman, Carl W. Dinger III and Ronson Corporation - ---------------------------------------------------------- On March 25, 2003, a derivative lawsuit was filed against the directors of Ronson in the Superior Court of New Jersey, Chancery Division, Essex County by Steel Partners II, L.P. and Warren G. Lichtenstein. The lawsuit alleges, among other matters, breach of fiduciary duty and an absence of disinterestedness by the defendants, and use of corporate control to advance their own interests. The lawsuit seeks monetary damages on behalf of Ronson as well as equitable relief to invalidate the Company's shareholder rights agreement and certain consulting 15 agreements, to enjoin performance of agreements with certain directors and to require the Company's President and C.E.O. to divest those shares acquired, and not to acquire additional shares while the shareholder rights agreement has been or remains in place. A special committee of two independent directors was created by the Board of Directors of the Company to investigate and evaluate the allegations made in the lawsuit. The committee concluded that none of the directors breached any fiduciary duty owed to the Company or its shareholders, that it is not in the best interests of the Company or its shareholders to continue legal action against the directors on any of the claims asserted in the derivative complaint and that the Company seek to dismiss the derivative action. The Company's directors have vigorously denied the claims and moved to have the complaint dismissed. That motion to dismiss was denied in February 2004. The Company's directors will continue to contest and to vigorously defend against the claims. On June 21, 2004, the Superior Court of New Jersey granted the motion of the Ronson directors, over the objection of Steel Partners II, L.P., to bifurcate the case. As a result, trial of all claims and defenses in the derivative suit, other than the defense based upon the report and findings of the Special Litigation Committee, will be held in abeyance pending trial of the Special Litigation Committee defense. The trial of the Special Litigation Committee defense was conducted in March 2005. In April 2005, the parties submitted post-trial memoranda. On July 23, 2004, Ronson Corporation and certain of its directors filed a Counterclaim and Third-Party Complaint against Steel Partners II, L.P., Warren G. Lichtenstein and certain close associates -- namely, Jack Howard, Howard M. Lorber and Ronald Hayes. The Counterclaim and Third-Party Complaint is based upon the New Jersey Shareholders Protection Act, and seeks compensatory and punitive damages, costs of suit and interest, as well as entry of a judgment directing the public disclosure of all limited partners of Steel Partners II, L.P., and persons acting directly or indirectly in concert with them in connection with the acquisition or attempted acquisition of stock in, or control of, Ronson Corporation. The Court directed that all discovery and other proceedings in connection with the Counterclaim and Third-Party Complaint are to be held in abeyance pending the Court's decision on the Special Litigation Committee defense. By written Opinion and Order dated March 30, 2006, the Superior Court of New Jersey denied in whole or in part the Special Litigation Committee defense. The Company's directors have filed a motion seeking clarification or, alternatively, modification of the Opinion and Order, and await hearing and determination. 16 Steel Partners II, L.P. v. Louis V. Aronson II, Robert A. Aronson, Barbara L. - ----------------------------------------------------------------------------- Collins, Carl W. Dinger III, Paul H. Einhorn, Erwin M. Ganz, Daryl K. Holcomb, - ------------------------------------------------------------------------------ I. Leo Motiuk, Gerard J. Quinnan, Justin P. Walder, and Saul H. Weisman - ----------------------------------------------------------------------- On or about April 14, 2005, Steel Partners II, L.P. commenced an action, on its own behalf as a shareholder of the Company, in the United States District Court for the District of New Jersey, against the current directors (other than Dr. David) of the Company, as well as Daryl K. Holcomb, the Company's chief financial officer, and Carl W. Dinger, a shareholder of and consultant to the Company. The Complaint alleges, among other things, that defendants should be treated collectively as an "Acquiring Person" under the Company's Shareholder Rights Agreement, and that their acquisition and ownership of more than 12% of the outstanding stock of the Company has triggered the provisions of the Shareholder Rights Agreement with respect to the offering of rights to shareholders, including Steel Partners II (notwithstanding that in its derivative action in the Superior Court of New Jersey, Steel Partners has challenged the legality and enforceability of the Company's Shareholder Rights Agreement). The Complaint alleges further that the defendants have violated reporting requirements under Section 13(d) of the Securities Exchange Act and Rule 13-d promulgated by the Securities Exchange Commission by failing to disclose an alleged agreement to coordinate their purchases of the Company's stock for the purposes of placing voting control in the hands of Louis V. Aronson II and for other undisclosed purposes. The Company's directors and its chief financial officer intend to contest the allegations of this second complaint filed by Steel Partners and vigorously defend the action. The Company's directors and its chief financial officer filed a motion to dismiss Steel Partners federal court complaint in July 2005. By order dated April 13, 2006, and accompanying written Opinion of the same date, the United States District Court denied the motion to dismiss filed by the Company's directors and its chief financial officer. The Company's directors and chief financial officer have filed a motion seeking certification of the Order by the United States District Court, so that a petition seeking permission to appeal to the Third Circuit Court of Appeals may be filed. The parties await consideration and determination by the United States District Court. Juraj Kosco and Maria Kosco vs. Ronson Consumer Products Corporation, Ronson - -------------------------------------------------------------------------------- Corporation, Industrial Waste Management, Inc., Cuno Incorporated, XYZ - -------------------------------------------------------------------------------- Corporations #1-10 (fictitious parties), John and/or Jane Does #1-10 (fictitious - -------------------------------------------------------------------------------- individuals) - ------------ The plaintiffs, a former employee and his spouse, claim damages for burns and other injuries allegedly received in an accident occurring during the employee's performance of his job. The lawsuit was filed in the Superior Court of New Jersey, Law Division, Middlesex County, on February 10, 2005, and claims damages totaling $10,000,000. The claimant has received, and is receiving, workers' compensation benefits related to the incident. Counsel has advised that it believes that the claim is barred by the exclusive remedy of the Workers' Compensation Act. Management believes that damages, if any, awarded in addition to the statutory workers' compensation benefits, will be well within the Company's insurance coverage. 17 David Pelous and Mary Pelous, his wife vs. Behr Process Corporation, et al. - --------------------------------------------------------------------------- On January 26, 2006, Ronson Corporation of Delaware, a former subsidiary of the Company, was notified it was named as one of at least forty-one defendants in the above matter. The plaintiffs claim damages from illness as a result of exposure to benzene and benzene-containing products. The Company has not received any information which management believes supports any claims by the plaintiffs against it. Management believes that damages, if any, will be well within the Company's insurance coverage. 18 ITEM 6 - EXHIBITS -------- 31.1(a) and (b) Rule 13a-14(a)/15d-14(a) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Section 1350 Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished but not filed for purposes of the Securities Exchange Act of 1934). 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: May 23, 2006 /s/Louis V. Aronson II ------------------------------ Louis V. Aronson II, President & Chief Executive Officer (Signing as Duly Authorized Officer of the Registrant) Date: May 23, 2006 /s/Daryl K. Holcomb --------------------------------- Daryl K. Holcomb, Vice President, Chief Financial Officer and Controller (Signing as Chief Financial Officer of the Registrant) 20 EX-31.1A 2 ex31-1a.txt Exhibit 31.1(a) CERTIFICATION I, Louis V. Aronson II, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Ronson Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 23, 2006 /s/Louis V. Aronson II --------------------------- Louis V. Aronson II President and C.E.O. 21 EX-31.1B 3 ex31-1b.txt Exhibit 31.1(b) CERTIFICATION I, Daryl K. Holcomb, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Ronson Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; c. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 23, 2006 /s/Daryl K. Holcomb ------------------------ Daryl K. Holcomb Vice President and C.F.O. 22 EX-32.1 4 ex32-1.txt Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of Ronson Corporation (the "Company"), certifies that: (1) the Quarterly Report on Form 10-Q of the Company for the quarterly period ended March 31, 2006 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78 m or 78 o(d)); and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: May 23, 2006 /s/Louis V. Aronson II ------------------------------------- Louis V. Aronson II President and Chief Executive Officer Dated: May 23, 2006 /s/Daryl K. Holcomb ------------------------------------- Daryl K. Holcomb Vice President and Chief Financial Officer This certification is made solely for the purposes of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose. 23 -----END PRIVACY-ENHANCED MESSAGE-----