-----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, D7ls0nXcN0+VgBFfFsWaerXhwtevsje7nZiDt8EneKJdn9uLlakEJ2UdA4nn4tug K4iKlEa12PAJsj1dgt5JBA== 0000850476-98-000014.txt : 19980813 0000850476-98-000014.hdr.sgml : 19980813 ACCESSION NUMBER: 0000850476-98-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980812 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: REXHALL INDUSTRIES INC CENTRAL INDEX KEY: 0000850476 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR HOMES [3716] IRS NUMBER: 954135907 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-17824 FILM NUMBER: 98683525 BUSINESS ADDRESS: STREET 1: 46147 7TH STREET WEST CITY: LANCASTER STATE: CA ZIP: 93534 BUSINESS PHONE: 8057260565 MAIL ADDRESS: STREET 1: 46147 7TH STREET WEST CITY: LANCASTER STATE: CA ZIP: 93534 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended June 30, 1998 Commission file number: 0-17824 REXHALL INDUSTRIES, INC. (Exact name of Registrant as specified in its charter) California 95-4135907 (State of Incorporation) (IRS Employer Identification No.) 46147 7th Street West, Lancaster California 93534 (Address of principal executive offices) (Zip Code) (805) 726-0565 (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 _____. Applicable only to Corporate Issuers State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 3,021,863 as of 7/31/1998. REXHALL INDUSTRIES, INC. INDEX PART 1 - FINANCIAL INFORMATION PAGE NUMBER Item 1. Financial Statements: Condensed Balance Sheets at June 30, 1998 3 and December 31, 1997 Condensed Statements of Operations for the three and six months ended June 30,1998 and June 30, 1997 4, 5 Condensed Statements of Cash Flows for the six months ended June 30, 1998 and June 30, 1997 6 Notes to Condensed Financial Statements as of June 30, 1998 7,8,9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10,11,12 PART II - OTHER INFORMATION Item 1. Legal Proceedings 13 Item 2. Exhibits and reports on Form 8-K - NONE Signatures 14 (Audited) (Unaudited) December 31 June 30 PART I - FINANCIAL INFORMATION 1997 1998 Item 1. - Financial Statements REXHALL INDUSTRIES, INC. CONDENSED BALANCE SHEETS Assets: Current Assets Cash and Short Term Investments $ 811,000 $ 4,001,000 Accounts Receivable 5,378,000 5,732,000 Inventories 9,439,000 7,851,000 Other Current Assets 59,000 147,000 Income Tax Receivable 337,000 --- Deferred Income Taxes 2,197,000 2,197,000 Total Current Assets 18,221,000 19,928,000 Property and Equipment - Net 4,957,000 4,946,000 Other Assets --- 385,000 TOTAL ASSETS $23,178,000 $25,259,000 Liabilities and Shareholders' Equity: Current Liabilities Accounts Payable 6,111,000 5,781,000 Restructuring Reserve 605,000 486,000 Warranty Allowance 937,000 968,000 Accrued Legal Settlement 1,590,000 1,384,000 Dealer Incentives 608,000 465,000 Other Accrued Liabilities 987,000 1,112,000 Income Taxes Payable --- 658,000 Current Portion of Long Term Debt 27,000 28,000 Total Current Liabilities 10,865,000 10,882,000 Deferred Income Tax Liabilities 36,000 36,000 Long Term Debt 797,000 783,000 Total Liabilities 11,698,000 11,701,000 Shareholders' Equity: Preferred Stock - no par value; Authorized 1,000,000 shares; no shares outstanding at June 30, 1998 and December 31, 1997 Common Stock - no par value; Authorized 10,000,000 shares; Outstanding 3,022,000 shares at June 30, 1998 and 2,715,000 shares at December 31, 1997 $ 6,267,000 $ 6,846,000 Retained Earnings 5,213,000 6,712,000 Total Shareholders' Equity 11,480,000 13,558,000 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $23,178,000 $25,259,000 PART I - FINANCIAL INFORMATION Item 1. - Financial Statements REXHALL INDUSTRIES, INC. CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended June 30, 1997 June 30, 1998 Sales $16,215,000 $18,380,000 Cost of Sales 13,583,000 15,456,000 Gross Profit 2,632,000 2,924,000 Selling, General, Administrative Expenses and Other Expenses 1,485,000 1,333,000 Income Before Taxes 1,147,000 1,591,000 Income Taxes 464,000 635,000 Net Income $ 683,000 $ 956,000 Basic Net Income Per Common Share $ .24 $ .33 Diluted Net Income Per Common and Equivalent Share $ .23* $ .32 Weighted Average Number of Common Shares Outstanding - Basic $2,894,000 $2,918,000 Weighted Average Number of Common and Equivalent Shares Outstanding-Diluted 2,963,000 2,949,000 *Originally reported as $.24 per share based on 2,821,000 shares outstanding. However, considering the 5% stock dividend of 142,000 shares on June 19, 1998, earnings were adjusted to $.23 per share. PART I - FINANCIAL INFORMATION Item 1. - Financial Statements REXHALL INDUSTRIES, INC. CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) Six Months Ended June 30, 1997 June 30, 1998 Sales $33,880,000 $32,550,000 Cost of Sales 28,848,000 27,463,000 Gross Profit 5,032,000 5,087,000 Selling, General, Administrative Expenses and Other Expenses 2,981,000 2,591,000 Income Before Taxes 2,051,000 2,496,000 Income Taxes 830,000 997,000 Net Income $ 1,221,000 $ 1,499,000 Basic Net Income Per Common Share $ .42 $ .51 Diluted Net Income per Common and Equivalent Share $ .41* $ .51 Weighted Average Number of Common Shares Outstanding -Basic 2,894,000 2,918,000 Weighted Average Number of Common and Equivalent Shares Outstanding - Diluted 2,963,000 2,949,000 *Originally reported as $.43 per share based on 2,821,000 shares outstanding. However, considering the 5% stock dividend of 142,000 shares on June 19, 1998, earnings were adjusted to $.41 per share. PART I - FINANCIAL INFORMATION Item 1. - Financial Statements REXHALL INDUSTRIES, INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1998 1997 1998 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $1,221,000 $1,499,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 132,000 167,000 Increase in accounts receivable (2,344,000) (354,000) Decrease in inventories 815,000 1,588,000 Decrease (increase) in other current assets 58,000 (88,000) Decrease in accounts payable (30,000) (330,000) Increase in other current liabilities 16,000 371,000 Increase in non-current accrued liabilities 155,000 --- Decrease in income tax receivable 271,000 312,000 Increase in deferred income tax liabilities 21,000 --- Net cash provided by operating activities 315,000 3,165,000 CASH FLOWS FROM INVESTING ACTIVITIES: Net cash used in investing activities - additions to property and equipment (207,000) (156,000) CASH FLOWS FROM FINANCING ACTIVITIES: (Repurchase) Issuance of Common Stock (157,000) 194,000 Repayment of long-term debt (12,000) (13,000) Net cash (used in) provided by financing activities (169,000) 181,000 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (61,000) $3,190,000 BEGINNING CASH AND CASH EQUIVALENTS 742,000 811,000 ENDING CASH AND CASH EQUIVALENTS $ 681,000 $4,001,000 PART I - FINANCIAL INFORMATION Item 1. REXHALL INDUSTRIES, INC. Notes to the Condensed Financial Statements June 30, 1998 1. Basis of Presentation: The accompanying unaudited condensed Financial Statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, in the opinion of management, they include all adjustments, consisting of normal accruals, necessary to present fairly the information set forth herein in accordance with generally accepted accounting principles for interim reporting. For further information refer to the Financial Statements and footnotes included in the Registrant's Annual Report on Form 10-K for year ended December 31, 1997. The Results of Operations for any interim period are not necessarily indicative of the results to be expected for the full year. 2. Summary of Significant Accounting Polices: Income Taxes Income tax expense is based upon the estimated effective tax rate for the entire fiscal year. The effective tax rate is subject to ongoing evaluation by management. Earnings Per Share Basic earnings per share represents net earnings divided by the weighted-average number of common shares outstanding for the period. Diluted earnings per share represents net earnings divided by the weighted- average number of shares outstanding, inclusive of the dilutive impact of common stock options and warrants. During the three and six month periods ended June 30,1998 and June 30,1997, the difference between basic and diluted earning per share was due to the dilutive impact of options to purchase common stock. Recently Issued Pronouncements In June 1997, The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS" 130"). SFAS 130 established standards for the reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. SFAS 130 requires all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement displayed with the same prominence as other financial statements. SFAS 130 does not require a specific financial statement format but requires an enterprise to display an amount representing total comprehensive income for the period covered by the financial statement. Comprehensive income include include items such as net income, changes in value of available for sale securities and foreign currency translation gains and losses. SFAS 130 is effective for fiscal years beginning after December 15, 1997. There is no difference between net income and comprehensive income for quarter ended June 30, 1998 or June 30, 1997. In June 1997, FASB issued Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information ("SFAS 131"). SFAS 131 established standards for public business enterprises to report information about operating segments in annual financial statements and requires those enterprises report selected information about operating segments in interim financial reports issued to shareholders. It also established standards for related disclosures about products and services, geographic areas and major customers. SFAS 131 is effective for financial statements for periods beginning after December 15, 1997. In the initial year of application, comparative information for earlier years is to be restated. SFAS 131 need not be applied to interim financial statements in the initial year of application, but comparative information for interim periods in the initial year of application is to be reported in financial statements for interim periods in the second year of application. The Company operates in only one business segment, the manufacture and distribution of recreational vehicles. Accordingly, SFAS 131 will not have an impact on the Company's financial reporting. 3. Detail of Inventory December 31, 1997 June 30, 1998 Raw Material $ 4,659,000 4,487,000 Work in Process 2,124,000 1,117,000 Finished Motorhomes 2,656,000 2,247,000 TOTAL $9,439,000 $7,851,000 4. Income Per Share The following is a reconciliation of the basic and diluted income per share computation for the quarters ended June 30, 1997 and 1998. Three Months Six Months June 30, 1997 June 30, 1998 June 30, 1997 June 30, 1998 Net income used for basic and diluted income per share $ 683,000 $ 986,000 $ 1,221,000 $ 1,499,000 Weighted average shares used In basic computation 2,894,000 2,918,000 2,894,000 2,918,000 Weighted effect of dilutive stock options 69,000 31,000 69,000 31,000 Shares used in diluted computation 2,963,000 2,949,000 2,963,000 2,949,000 Income per share: Basic $ 0.24 $ 0.33 $ 0.42 $ 0.51 Diluted $ 0.23 $ 0.32 $ 0.41 $ 0.51 During 1998, the Company issued a 5% stock dividend, resulting in the issuance of 142,000 shares of common stock. The impact of this stock dividend has been retroactively recorded in the per share calculation for the three months and six months ended June 30, 1997. 5. RESTRUCTURING During 1997, the Company's Board of Directors approved a restructuring of the Company's operations. The restructuring plan provided for changes in the operations, and production strategies. In implementing these plans, the Company decided to cease manufacturing operations at it's Elkhart, Indiana plant. The Company recorded charges aggregating $1,042,000 as a result of this restructuring plan in the fourth quarter of 1997. The ceasing of manufacturing operations at the Elkhart facility was made in conjunction with the recently completed expansion of the California facility to accommodate the projected increase in production at the California plant. As a result of this repositioning, the Company determined that certain of it's fixed assets and inventories located at the Elkhart plant should be written down, resulting in a charge of approximately $937,000. Additionally, the Company recorded severance and other related costs relating to the closure of the Elkhart plan for approximately $105,000, which was included as a restructuring charge in the accompanying statements of operations for the year-ended December 31, 1997. As of June 30, 1998, the Company had a reserve of $486,000 relating to this restructuring. Restructuring reserve at 12/31/97 $605,000 Payments and asset write-downs through June 30, 1998 119,000 Future cash outlay and charges $486,000 6. The Company has advanced $385,000 to key employees during the six months ended June 30, 1998 under the Company's Incentive and Nonstatutory Stock Option Plan (The Plan). The advances are evidenced by long term notes receivable bearing interest annually until the maturity date. The notes bear interest at the test rate as defined by Regulation 1.1274-4 of Internal Revenue Code of 1986, as amended, subject to annual adjustment as approved by the Company's Compensation Committee. The maturity date of the notes are March 20, 2003 and April 19, 2003 and are secured by a pledge of the shares purchased with proceeds of the notes under the Company's Plan. The number of options exercised under the Plan was 123,000 shares during the six months ended June 30, 1998. PART I - FINANCIAL INFORMATION Item 2. - Management Discussion and Analysis of Financial Condition and Results of Operations Results of Operations For the Three Months ended June 30, 1998 and for the Three Months ended June 30, 1997 Sales - 1998 Compared with 1997 Sales for the quarter ended June 30, 1998, totaled $18,380,000 as compared to $16,215,000 in 1997. The units sold for the quarter ended June 30, 1998 were 290 vs 275 in 1997. The increase in sales was principally due to the increased production efficiencies coming on line at the California Plant as a result of the Company's restructuring plan adopted in the forth quarter of 1997 which has also allowed sales orders to be filled to meet the recent increased demand. Cost of Sales - 1998 compared with 1997 The Cost of Sales as a percentage of sales for the second quarter of 1998 was 84.1% vs 83.8% in the second quarter of 1997. The cost of sales percentage] for 1998 slightly increased due to increased production schedules and overtime required to meet the second quarter sales demand. Gross Profit for the second quarter of 1998 was 15.9% vs 16.2% for the second quarter of 1997. This decrease was due to the cost increase discussed in Cost of Sales above. The Company anticipates that gross margins should improve in the future due to economies of scale realized in operating one production facility. However there can be no assurance that gross margins will improve due to the unknown nature of competitors within the industry. Selling, General Administrative and Other Expenses-1998 compared with 1997 Selling, General Administrative, and Other Expenses decreased in the second quarter of 1998 by $152,000, as a result of the closure of the Indiana Plant in conjunction with the Company's restructuring plan. Selling, General and Administrative and Other Expenses, as a percentage of sales were 7.3% in 1998 as compared to 9.2% in the second quarter of 1997. This decrease was due to the expense amounts being spread over a larger sales base. Results of Operations For the Six Months ended June 30, 1998 and for the Six Months ended June 30, 1997 Sales - 1998 Compared with 1997 Sales for the six months ended June 30, 1998, totaled $32,550,000 as compared to $33,880,000 in 1997. The units sold for the six months ended June 30, 1998 were 521 vs. 582 in 1997. The decrease in sales was principally due to the unusual amount of inclement weather conditions that hampered first quarter retail sales efforts, limited availability of Allison Transmissions and the lead time needed to increase production at the California facility to compensate for the production closure at Indiana. Costs of Sales - 1998 compared with 1997 The Cost of Sales as a percentage of sales or the first six months of 1998 was 84.4% vs 85.2% in the first six months of 1997. The cost of sales percentage for 1998 decreased due to the centralization of production in the California facility Gross Profit for the first six months of 1998 was 15.6% vs, 14.8% for the first six months of 1997. This increase was due to the cost decrease discussed in Cost of Sales above. The Company anticipates that gross margins should improve in the future due to economies of scale realized in operating one production facility. However, there can be no assurance that gross margins will improve due to the unknown nature of competitors within the industry. Selling, General Administrative and Other Expenses - 1998 compared to 1997 Selling, General Administrative, and Other Expenses decreased in the first six months of 1998 by $390,000, mostly as a result of the decrease in direct selling costs associated with the reduction in sales as discussed in Sales above. Selling, General and Administrative and Other Expenses, as a percentage, were 8.0% of sales in 1998 as compared to 8.8% in the first six months of 1997. The decrease was do to the expense amounts being saved due to centralization of production in the California facility. Item 2. - Management Discussion and Analysis or Plan of Operation Income before taxes 1998 - compared with 1997 The income before taxes in the second quarter of 1998 was 8.6% compared to 7.0% for the same period of 1997. The increase in income before taxes in the second quarter of 1998 was due to increased sales and efficiencies gained from the Company's restructuring plan adopted in the fourth quarter of 1997, including efficiencies gained from the Indiana plant closure. Financial Condition, Capital Resources and Liquidity The Company's cash needs are primarily to support it's inventory production, refurbishment of facilities and equipment and systems development. The Company has historically financed its operations primarily with internally generated funds and trade credit. At June 30, 1999, working capital was $9,046,000 as compared to working capital of $7,356,000 at December 31, 1997. Cash provided by operating activities from the six months ended June 30, 1998 was $3,165,000 as compared to $315,000 for the comparable period in 1997. During the first six months, accounts receivable increased by $354,000 and accounts payable decreased by $330,000. These cash flow uses were offset by a reduction in inventory of $1,588,00 and net income of $1,499,000 for the period. During the six months ended June 30, 1998, $119,000 of cash was used to execute the Company's restructuring plan adopted in first quarter of 1997. Cash flows from investing activities for the six months ended June 30, 1998 consisted solely of capital expenditures of $156,000 as compared to $207,000 for comparable period in 1997. The Company's capital expenditures for the remainder of 1998 are currently expected to be approximately $200,000 and will relate to refurbishment and expansion of certain production facilities equipment and the enhancement of management information system. Cash flows from financing activities for the first six months ended June 30, 1998 consisted principally of stock issued for $199,000, a stock repurchase of $5,000 and repayment of long term debt of $13,000. The Company will buy back stock in the open market from time to time when the market price is deemed to be appropriate by management. Future repurchases of common stock for the remainder of 1998 are not expected to be significant. Management believes that funds generated from operations, available borrowing under its line of credit and the use of trade credit will be sufficient to satisfy the Company's working capital requirements and commitments for capital expenditures through the second quarter of 1999. At present, the Company has available a $3,500,000 revolving line of credit with a bank expiring on July 1, 1999 which can be used for working capital purposes. At June 30, 1998, no amounts were outstanding under this line but the Company had $365,000 against the line of credit for a stand-by Letter of Credit permitting the company to remain self-insured for Worker' Compensation. SEASONALITY The Company's business is subject to seasonal and quarterly fluctuations. Historically, the Company has realized a higher portion of its sales in the second quarter and third quarter, consistent with the summer vacation season. This is consistent with industry trends. CAUTIONARY STATEMENT FOR PURPOSES OF "SAFE HARBOR PROVISIONS" OF THE PRIVATE SECURITY LITIGATION REFORM ACT OF 1995 Certain statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations that are not related to historical results are forward looking statements. Actual results may differ materially from those projected or implied in the forward looking statements. Further, certain forward looking statements are based upon assumptions of future events which may not prove to be accurate. These forward looking statements involve risks and uncertainties which are more fully described in Item 1, Part I of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. I - OTHER INFORMATION Item 1 - Legal Proceedings Legal Settlement - The class action lawsuit Masterjohn et al vs. Rexhall, et al,, Case No. 752188 filed in the Superior Court of Orange County, California has been settled subject to court approval. Under the agreement Rexhall would pay $825,000 in cash, and issue one coupon per vehicle owned by members of the class of $1250 towards purchase of a new Rexhall vehicle or $200 toward service, parts and labor. Coupons would be redeemable at Rexhall's two service centers in Indiana and California, as well as three other dealerships geographically dispersed. The total number of vehicles owned by class members is estimated at approximately 5,000. The Company has recorded a charge of $1,590,000 in 1997 relating to this settlement. To date, the preliminary approval of the settlement has been accepted by the Superior Court of Orange County, California and pursuant to that preliminary approval, $206,000 has been paid to the plaintiffs' attorneys. Final approval may come in the third quarter. Item 2. - Reports on Form 8-K None REXHALL INDUSTRIES, INC. 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. REXHALL INDUSTRIES, INC. by (Registrant) Date: August 12,1998 /s/William J. Rex William J. Rex Chairman, President and Chief Executive Officer Date: August 12, 1998 /s/Anthony J. Partilipo Anthony J. Partipilo Chief Financial Officer EX-27 2
5 6-MOS DEC-31-1997 JUN-30-1998 4,001,000 0 5,732,000 0 7,851,000 19,928,000 4,946,000 0 25,259,000 10,882,000 0 0 0 6,846,000 0 25,259,000 32,550,000 32,550,000 27,463,000 27,463,000 2,591,000 0 0 2,496,000 997,000 1,499,000 0 0 0 1,499,000 .51 .51
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