-----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, PByOfaABUfsYONFs05JkNdfR08nwlRbN7LZqNDOc3B7pA0KfvU1a5BHuNVt76kr2 tq3QxfS53wLnJhCxr51LVw== 0000950116-98-001658.txt : 19980813 0000950116-98-001658.hdr.sgml : 19980813 ACCESSION NUMBER: 0000950116-98-001658 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980812 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: REXX ENVIRONMENTAL CORP CENTRAL INDEX KEY: 0000012203 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', AND JUNIORS OUTERWEAR [2330] IRS NUMBER: 132625545 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14121 FILM NUMBER: 98684203 BUSINESS ADDRESS: STREET 1: 350 PARK AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2127898900 MAIL ADDRESS: STREET 1: 1411 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10018 FORMER COMPANY: FORMER CONFORMED NAME: OAKHILL SPORTSWEAR CORP /NY/ DATE OF NAME CHANGE: 19940131 FORMER COMPANY: FORMER CONFORMED NAME: BIO MEDICAL SCIENCES INC DATE OF NAME CHANGE: 19830725 FORMER COMPANY: FORMER CONFORMED NAME: COMPUTRONIC SCIENCES INC DATE OF NAME CHANGE: 19690415 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended June 30, 1998 Commission File Number 0-5613 ------------- ------ REXX ENVIRONMENTAL CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) NEW YORK 13-2625545 - -------------------------------------------------------------------------------- (State or other jurisdiction (I.R.S Employer of incorporation) Identification Number) 350 PARK AVENUE, NEW YORK, NEW YORK 10022 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (212) 750-7755 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (Former name, former address, and former fiscal year, if changed since last report) Indicate by checkmark 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 August 7, 1998, the registrant had 2,467,576 shares of common stock outstanding. Page 1 of 12 Pages REXX ENVIRONMENTAL CORPORATION INDEX PART I - Financial Information PAGE Unaudited financial statements: Consolidated balance sheets - June 30, 1998 and December 31, 1997 3 Consolidated statements of operations - three months ended June 30, 1998 and 1997 4 Consolidated statements of operations - six months ended June 30, 1998 and 1997 5 Consolidated statements of cash flows - six months ended June 30, 1998 and 1997 6 Notes to consolidated financial statements 7-8 Management's discussion and analysis of financial condition and results of operations 9-10 PART II - Other Information Item 4. Submission of Matters to a Vote of Security Holders 11 Signatures 12 Page 2 of 12 Pages REXX ENVIRONMENTAL CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands except share amounts) (Unaudited)
June 30, December 31, 1998 1997 Assets Current assets: Cash and cash equivalents $ 179 $ 710 Accounts receivable - net 3,773 2,353 Costs in excess of billings 578 600 Assets held for sale 780 1,350 Other current assets 76 142 ------- ------- Total current assets 5,386 5,155 Property and equipment, net 1,173 718 Goodwill 3,019 3,125 Other assets 47 57 ------- ------- $ 9,625 $ 9,055 ======= ======= Liabilities and stockholders' equity Current liabilities: Current portion of long-term debt $ 649 $ 1,015 Accounts payable 1,579 1,153 Billings in excess of costs 93 238 Accrued expenses 835 752 Deposit on asset held for sale 0 152 Income taxes payable 396 376 ------- ------- Total current liabilities 3,552 3,686 ------- ------- Long-term debt, net of current portion 505 180 ------- ------- Other long-term liabilities 20 50 ------- ------- Stockholders' equity: Preferred stock, $1.00 par value, authorized 1,000,000 shares; -0- shares issued Common stock, $.02 par value, authorized 12,000,000 shares; 5,279,828 shares issued 105 105 Capital in excess of par value 27,925 27,925 Accumulated deficit (5,474) (5,883) Common stock held in treasury, at cost (2,812,252 shares) (17,008) (17,008) ------- ------- Total stockholders' equity 5,548 5,139 ------- ------- $ 9,625 $ 9,055 ======= =======
See notes to consolidated financial statements. Page 3 of 12 Pages REXX ENVIRONMENTAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share amounts) (Unaudited) Three months ended June 30, 1998 1997 Revenues $ 3,371 $ 13 Cost of services 2,211 0 ------- ------- Gross profit 1,160 13 General and administrative expenses 926 176 ------- ------- Income (loss) from operations 234 (163) Other income: Interest (expense) income, net (23) 46 Other income 16 0 ------- ------- Income (loss) before provision for taxes 227 (117) Provision for taxes 21 4 ------- ------- Net income (loss) $ 206 ($ 121) ======= ======= Per share data: Basic $.08 ($.06) Diluted $.08 ($.06) Weighted average shares outstanding: Basic 2,468 2,058 Diluted 2,525 2,058 See notes to consolidated financial statements. Page 4 of 12 Pages REXX ENVIRONMENTAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share amounts) (Unaudited) Six months ended June 30, 1998 1997 Revenues $ 7,574 $ 25 Cost of services 5,164 0 ------- ------- Gross profit 2,410 25 General and administrative expenses 1,952 346 ------- ------- Income (loss) from operations 458 (321) Other income: Interest (expense) income, net (31) 102 Other income 25 0 ------- ------- Income (loss) before provision for taxes 452 (219) Provision for taxes 43 9 ------- ------- Net income (loss) $ 409 ($ 228) ======= ======= Per share data: Basic $.17 ($.11) Diluted $.16 ($.11) Weighted average shares outstanding: Basic 2,468 2,058 Diluted 2,529 2,058 See notes to consolidated financial statements. Page 5 of 12 Pages REXX ENVIRONMENTAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended June 30, 1998 1997 Cash flows used in operating activities: Net income (loss) $ 409 ($ 228) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 182 0 ------- ------- 591 (228) Changes in assets and liabilities (968) (984) ------- ------- Net cash used in operating activities (377) (1,212) ------- ------- Cash flows from investing activities: Capital expenditures (531) 0 Net proceeds on disposal of disc. operations 0 543 Decrease in assets held for sale 570 0 Deposit on asset held for sale (152) 0 ------- ------- Net cash provided by investing activities (113) 543 ------- ------- Cash flows from financing activities: Net short-term borrowings 0 0 Principal payment of long-term debt-net (41) 0 ------- ------- Net cash used in financing activities (41) 0 ------- ------- Net decrease in cash (531) (669) Cash at beginning of period 710 5,314 ------- ------- Cash at end of period $ 179 $ 4,645 ======= ======= Supplemental disclosures of cash flow information: Changes in assets and liabilities: Accounts receivable ($1,420) $ 30 Costs in excess of billings 22 0 Other current assets 66 23 Other assets 10 0 Billings in excess of costs (145) 0 Accounts payable and accrued expenses 509 (684) Income taxes payable 20 (353) Other liabilities (30) 0 ------- ------- ($ 968) ($ 984) ======= ======= Cash paid - net during the period for: Interest $ 40 $ 13 Income taxes (including interest thereon) $ 23 $ 561 Page 6 of 12 Pages REXX ENVIRONMENTAL CORPORATION Notes to Consolidated Financial Statements (Unaudited) Note 1 - Consolidation and General The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Watkins Contracting, Inc. ("WCI") (since its acquisition by the Company on October 21, 1997) and Oak Hill Sportswear Holding Corporation, which was inactive. Certain previously reported amounts have been reclassified to conform to the 1998 presentation. The results herein reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary to fairly state the results and current financial condition of the Company for the respective periods. The accompanying financial statements have been prepared without audit and do not include all footnotes and disclosures required under generally accepted accounting principles and should be read in conjunction with the Company's audited financial statements contained in its Annual Report on Form 10-K for its year ended December 31, 1997. Note 2 - Acquisition and Consolidated Condensed Pro Forma Financial Information On October 21, 1997, the Company completed the acquisition of 100% of the outstanding shares of WCI, a privately-owned, San Diego-based environmental remediation contractor. Founded in 1991, WCI provides asbestos abatement, hazardous materials and soil remediation, and demolition services, primarily in California, to commercial and governmental clients. The total consideration consisted of (a) $3,600,000 in cash, using cash on hand, (b) 400,000 shares of restricted REXX Environmental Corporation common stock and (c) rights entitling the former owners of WCI to sell up to 50,000 shares per quarter of the common stock back to the Company starting in April, 1999, at $5.00 per share if WCI earns in excess of $2,700,000 pretax income during 1998, and to sell up to an additional 50,000 shares per quarter back to the Company starting in April, 2000, at $5.00 per share if WCI earns in excess of $2,700,000 pretax income during 1999. The acquisition was accounted for using the purchase method of accounting. Acquisition costs in excess of the fair value of net tangible assets acquired amounted to approximately $3,166,000, representing goodwill. The purchase price has been allocated to the assets purchased and liabilities assumed based upon the fair values on the date of acquisition, as follows: Working capital $ 685,000 Property and equipment 1,204,000 Other assets 61,000 Goodwill 3,166,000 Other liabilities ( 683,000) ---------- Purchase price $4,433,000 ========== Page 7 of 12 Pages The following condensed unaudited pro forma statement reflects the results of operations of the Company as if the acquisition had been consummated at the beginning of 1997. The unaudited pro forma financial information presented herein does not necessarily reflect the results of operations and financial position of the Company had the acquisition actually taken place at such time. Consolidated Condensed Pro Forma Statement of Operations (unaudited) Six months ended June 30, 1997 ---------------- Revenues $ 5,180 ---------- Income from operations 657 Other income 29 ---------- Income before income taxes 686 Income taxes 79 ---------- Net income $ 607 ========== Pro forma net income per share $ .25 ===== Note 3 - Net income (loss) per share: In 1997, The Company adopted Statement of Financial Accounting Standards No. 128 ("FAS 128"), Earnings per Share. FAS 128 prescribes that companies present basic and diluted earnings per share amounts, as defined, on the face of the statement of operations. Net income (loss) per share is based on the weighted average number of shares outstanding. The number of shares used in the computations of basic and diluted net income per share for the second quarter ended June 30, 1998 were 2,467,576 and 2,524,516, respectively, and for the second quarter of 1997 were 2,057,576 for both computations. The number of shares used in the computations of basic and diluted net income per share for the six months ended June 30, 1998 were 2,467,576 and 2,528,977, respectively, and for the first six months of 1997 were 2,057,576 for both computations. Net income (loss) used in the computation of basic and diluted net income (loss) per share is not affected by the assumed issuance of stock under the Company's stock option plan and is therefore the same for both calculations. Options to purchase 254,000 shares at prices ranging from $2.00 to $5.00 per share were outstanding at June 30, 1998. The dilutive impact of such options is the addition of 56,940 shares to weighted average diluted shares outstanding for the second quarter of 1998 and less than $0.01 decrease in earnings per share. For the six months ended June 30, 1998, the dilutive impact of such options is the addition of 61,401 shares outstanding and less than $.01 decrease in earnings per share. Options to purchase 184,000 shares at prices ranging from $2.00 to $4.25 per share were outstanding at June 30, 1997, but were not included in the computation of diluted net income per share because the assumed exercise of the options would be anti-dilutive. Page 8 of 12 Pages MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and capital resources: Working capital at June 30, 1998 amounted to $1,834,000 compared to $1,469,000 at December 31, 1997, an increase of $365,000 primarily due to the net income for the period. Net accounts receivable were $3,773,000 at June 30, 1998 as compared to $2,353,000 at December 31, 1997, an increase of $1,420,000. The increase was due to higher revenues in the second quarter and first six months of 1998 compared to the fourth quarter of 1997. Management believes that the Company's cash and cash equivalents at June 30, 1998, in addition to WCI's working capital line of credit and equipment line of credit, obtained in February 1998 and increased in June 1998, and the Company's cash flow from operations will provide it with sufficient funds necessary for its working capital and capital expenditures. The Company intends to pursue potential acquisitions in its industry. As of June 30, 1998, no commitments had been made and no material expenditures had been incurred in connection with any such potential acquisition. There is no assurance that the Company will complete any such potential acquisition. In the event the Company completes an acquisition, it may require additional capital for the consummation of the acquisition and/or the additional working capital needs of an acquired business. The Company has performed an assessment of its Year 2000 issues. Management believes that the Company's material operating systems, including hardware and software, are Year 2000 compliant. Management believes that the Company will not incur material expenses or face material adverse consequences associated with Year 2000 issues. Results of operations: Revenues in 1998 consisted principally of WCI's contract revenues. Revenues in 1997 consisted solely of consulting income. Revenues in the quarter and six months ended June 30, 1998 were $3,371,000 and $7,574,000, respectively. Consulting income, which arose from the Company's agreement with a purchaser of its former Sportswear Division, was $13,000 in the quarter ended June 30, 1997 and $25,000 in the six months ended June 30, 1997. The consulting agreement expired on December 31, 1997 and was not renewed. Gross profit in the second quarter of 1998 amounted to $1,160,000 as compared to $13,000 in 1997, an increase of $1,147,000. Gross profit in the six months ended June 30, 1998 amounted to $2,410,000 as compared to $25,000 in the comparable period of 1997, an increase of $2,385,000. The increases are attributable to the addition of WCI's gross profit. General and administrative expenses rose in the quarter and six months ended June 30, 1998 compared to the comparable periods of 1997 principally as a result of the addition of WCI's general and administrative expenses and the growth in expenses in connection with the Company's administrative and corporate overhead. Page 9 of 12 Pages Interest (expense) income - net changed to an expense of $23,000 in the second quarter of 1998 and $31,000 in the first half of 1998 from income of $46,000 in the second quarter of 1997 and $102,000 in the first half of 1997, a reduction of $69,000 and $133,000, respectively. The decreases were attributable to the Company's net borrowing position in 1998 due to WCI's working capital and equipment lines of credit, compared to the Company's net cash position in 1997. Amortization of goodwill and other income did not exist in the second quarter or first half of 1997. In 1998, they were attributable to the acquisition of WCI, which was accounted for as a purchase. Provision for income taxes grew to $21,000 and $43,000 in the quarter and six months ended June 30, 1998 from $4,000 and $9,000 in the comparable periods of 1997, an increase of $17,000 and $34,000, respectively. The increase was due to the Company's new status as a taxpayer in California. In both periods, the Company recorded no provision for federal income taxes as the Company has a net operating loss carryforward. State income taxes for states other than California represents franchise taxes in both years. Forward looking information: The statements contained herein may contain forward looking statements relating to such matters as anticipated financial performance, business prospects, acquisition strategy, growth and similar matters. The Private Securities Reform Act of 1995 provides a safe harbor for forward looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the actual outcome or results to differ materially from the anticipated outcome or results expressed in the Company's forward looking statements such as intensified competition and its impact on revenues and profit margins, the availability of capital for growth and potential acquisitions, the availability of suitable acquisitions on terms management deems acceptable and other items described in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. Page 10 of 12 Pages PART II. OTHER INFORMATION Item 4. Submission of Matters to Vote of Security Holders ------------------------------------------------- (a) The Annual Meeting of the shareholders of the Company was held on June 25, 1998. (b) At said Annual Meeting, the following persons were elected directors, with the following number of shares voted for and withheld: For Withheld --------- -------- Arthur L. Asch 2,352,189 3,760 Michael A. Asch 2,352,304 3,645 Joseph Greenberger 2,352,297 3,652 James L. Hochfelder 2,352,304 3,645 Brian A. Wasserman 2,352,304 3,645 Page 11 of 12 Pages 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. REXX ENVIRONMENTAL CORPORATION (Registrant) Date: August 12, 1998 By: /s/ Arthur L. Asch ---------------------------------------- Arthur L. Asch, Chairman of the Board Date: August 12, 1998 By: /s/ Michael A. Asch ---------------------------------------- Michael A. Asch, President and Treasurer Page 12 of 12 Pages EX-27 2 EXHIBIT 27
5 6-MOS DEC-31-1998 JUN-30-1998 179 0 3,773 0 0 5,386 1,173 0 9,625 3,552 505 0 0 5,548 0 9,625 7,574 7,574 5,164 7,116 (25) 0 31 452 43 409 0 0 0 409 .17 .16
-----END PRIVACY-ENHANCED MESSAGE-----