RB Rubber Reports Q2 Revenues
13 August 1998
RB Rubber Reports 14% Increase In Second Quarter Revenues
MCMINNVILLE, Ore.--Aug. 13, 1998--RB Rubber Products, Inc. today reported second quarter results with solid revenue growth and significant progress in integrating its new molded products acquisition.
Revenues increased 14% to $2.0 million for the second quarter of 1998, compared to $1.7 million in the second quarter of 1997. Revenues for the first six months of 1998 grew 16% to $3.9 million, from $3.4 million in the like period of 1997.
Profitability was hampered by the lack of low cost raw materials and the costs associated with integrating the recent acquisition of Iowa Mat. The net loss for the second quarter was $159,000 or $.07 per share compared to net income of $147,000 or $.07 per share in the second quarter last year. For the six month period, the company virtually broke even with a net loss of $26,000 or $.01 per share, compared to net income of $267,000 or $.12 per share in the first six months of 1997.
"Our ability to increase sales at this rate while incorporating a whole new line of products into our mix is quite satisfying," said Ron Bogh, president and CEO. "As expected, the acquisition of Iowa Mat, now known as our molded products division, impacted our bottomline in this quarter."
On April 1, 1998, RB Rubber acquired certain assets, technology and products from Iowa Mat Company for approximately $800,000 in cash and stock. The new product line includes recycled rubber paving tiles, playground fall protection tiles and molded rubber barbell plates. The acquisition also included equipment, proprietary processes and customer accounts, including a major manufacturer of playground equipment and a worldwide leader in fitness equipment.
"This acquisition is a fundamental part of our strategic plan to grow and expand," said Bogh. "We are always looking to develop and/or acquire technologies and processes that convert discarded tires into high quality products for everyday use. It also helps meet the growing industrial and consumer demands for environmentally friendly products."
"This recent acquisition is close to being completely integrated into our company," continued Bogh. "The 10,000-square-foot addition to our existing facility, which will house the molded products' equipment line, is nearly complete. Sales of the molded products have continued during this transition from existing inventories and accounted for about 6% of revenues in the quarter. Once our setup and product testing are complete later this year, we expect greater contributions from the molded products going forward."
The gross margin for the quarter was 18% compared to 41% in the year-ago quarter. It was 29% for the first six months of 1998 and 41% for the like period last year. The decline was primarily due to the molded products acquisition, including test runs of the new products, and increased raw material costs.
"Historically our raw material costs have varied with the availability of suitable tire chips. Currently, for a variety of reasons, we are only able to use truck tires," said Bogh. "If enough truck tire chips are not available, we must supplement the raw material supply with higher cost rubber buffings, a by-product of tire re-capping. We are continuing to explore ways to broaden our available raw material supply."
"Recently, we've entered into a new agreement with our primary tire chip source," continued Bogh. "With this new agreement, our tire chip supply should increase over time, and is expected to decrease our reliance on more expensive buffings in the future. Our ability to maintain a consistent supply of low cost raw materials is fundamental to our success."
Selling expenses, as a percent of sales, remained level quarter over quarter at 10%. The 17% dollar increase was a result of heightened product promotion and advertising, as well as additional sales personnel. General and administrative expenses increased as a percent of sales to 19% in the second quarter of 1998 from 16% in the second quarter last year. This was primarily due to one-time costs related to the Iowa Mat acquisition.
"Our recent expansion is apparent on our balance sheet. At June 30, 1998, we had a 53% increase in inventories from one year ago, and a 45% increase in long-term debt over the same period. We believe our debt is manageable as it is only 16% of capitalization and 25% of equity, and our current ratio is 1.6:1," concluded Bogh.
RB Rubber Products, Inc. is an integrated recycler and manufacturer that transforms scrap tires and rubber into high quality, durable rubber mats, protective surfacing and other rubber products. Applications of the company's products include surfacing for agribusiness, sports and fitness facilities and other commercial and industrial uses.
This news release contains forward-looking statements that involve a number of risks and uncertainties. Future market conditions are subject to supply and demand conditions and decisions of other market participants over which the company has no control and which are inherently very difficult to predict. Accordingly, there can be no assurance that the company's revenues or gross margins will improve. In addition, there are other factors that could cause actual results to differ materially, including competitive pressures, increased demand for, or diminished supply of the company's raw materials, and unanticipated difficulties in integrating acquired technologies or businesses. Investors are directed to the company's filings with the Securities and Exchange Commission, including the company's 1997 10-KSB for additional information on the risks and uncertainties as well as other aspects of the company's business.
RB Rubber Products, Inc.
Consolidated Statements of Operations
(unaudited)
(in thousands, except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
Net sales $ 1,966 $ 1,725 $ 3,892 $ 3,352
Cost of sales 1,602 1,010 2,768 1,983
Gross profit 364 716 1,124 1,369
Gross margin 18.49% 41.47% 28.88% 40.83%
Selling expenses 201 172 431 317
General and administrative 371 293 693 597
Total operating expenses 572 465 1,124 915
Income from operations (208) 251 (0) 454
Interest expense, net (26) (26) (47) (52)
Gain on sale of assets 13 -- 13 1
Other income, net (5) -- 8 4
Income before income taxes (226) 225 (26) (406)
Pre-tax margin -11.51% 13.05% -0.68% 12.11%
Provision for income taxes (76) 79 (9) 139
Net income (loss) $ (150) $ 147 $ (17) $ 267
Profit margin -8.10% 8.50% -0.68% 7.96%
Net income (loss) per share $ (0.07) $ 0.07 $ (0.01) $ 0.12
Weighted average
shares outstanding 2,276 2,221 2,276 2,214
RB RUBBER PRODUCTS, INC.
CONDENSED BALANCE SHEETS
(unaudited)
(in thousands)
June 30, December 31, June 30,
1998 1997 1997
ASSETS
Current assets:
Cash and cash equivalents $ 164 $ 292 $ 22
Accounts receivable, net 788 910 771
Income taxes receivable, net 21 - 89
Inventories, net 956 692 623
Prepaid expenses and other 83 38 85
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Total current assets 2,012 1,932 1,590
Property, plant and equipment, net 4,980 4,067 4,678
Other assets 508 277 258
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Total assets $ 7,501 $ 6,276 $ 6,526
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable - bank $ 277 $ - $ 390
Notes payable - other 19 - -
Accounts payable 610 404 411
Payroll and related benefits payable 86 69 117
Interest payable - 4 -
Income taxes payable - 19 77
Current portion of long-term debt 239 135 124
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Total current liabilities 1,232 631 1,119
Long-term debt, net of current portion 1,186 773 820
Deferred income taxes 250 238 215
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Total liabilities 2,668 1,642 2,153
Shareholders' equity:
Common stock, 20,000,000 shares authorized;
2,239,167 and 2,172,500 shares issued and
outstanding 4,014 3,797 3,797
Additional paid-in capital 283 283 283
Retained earnings 536 553 292
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Total shareholders' equity 4,833 4,634 4,372
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Total liabilities and shareholders'
equity $ 7,501 $ 6,276 $ 6,526
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