<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1995 Comm. File No. 0-8115
- - ------------------------------------------------- ------
Resource General Corporation
---------------------------------------------------------------
(Exact name of Small Business Issuer as specified in its charter)
Ohio 31-0737351
- - --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2365 Scioto Harper Drive, Columbus, Ohio 43204
- - --------------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (614) 279-8877
----------------------------
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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.
(1) YES X NO (2) YES X NO
--- --- --- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the last practiable date: 1,085,820 common shares, without
par value, outstanding as of September 30, 1995.
1
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RESOURCE GENERAL CORPORATION
----------------------------
INDEX
-----
<TABLE>
<CAPTION>
Part I. Financial Information Page No.
<S> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets for September 30, 1995 3 and 4
and December 31, 1994
Consolidated Statement of Income for the nine 5
months ended September 30, 1995 and September 30,
1994, and three months ended September 30, 1995 and September
30, 1994
Consolidated Statement of Cash Flows for the 6
nine months ended September 30, 1995 and
September 30, 1994
Notes to Consolidated Financial Statements 7 and 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 and 10
Part II. Other Information 11, 12 and 13
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RESOURCE GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
September 30 Dec. 31
ASSETS 1995 1994
- - ------ ------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash $1,892 $65,224
Accounts Receivable $1,944,366 $2,315,219
Inventories $671,980 $945,385
Other Current Assets $137,738 $116,848
------------ ------------
Total Current Assets $2,755,976 $3,442,676
------------ ------------
Property and Equipment, at cost
Office Equipment $337,097 $295,130
Manufacturing equipment $872,250 $934,221
Leasehold improvements $234,144 $216,689
Vehicles $81,600 $81,600
Computer Network $92,607 $0
------------ ------------
$1,617,698 $1,527,640
Less: Accumulated Depreciation & Amortization ($797,270) ($687,827)
------------ ------------
Net Property and Equipment $820,428 $839,813
------------ ------------
OTHER NON-CURRENT ASSETS
Inventory, Longterm Portion $50,000 $50,000
Oil & Gas Royalty Interests, Net of Amort. $15,254 $22,004
Land Held for Investment $169,720 $169,720
Goodwill, net (Note 3) $117,836 $138,630
Other noncurrent assets $25,498 $41,367
------------ ------------
Total Other Non-Current Assets $378,308 $421,721
------------ ------------
TOTAL ASSETS $3,954,712 $4,704,210
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RESOURCE GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
September 30 Dec. 31
LIABILITIES 1995 1994
- - ----------- ------------- -------------
<S> <C> <C>
Accounts Payable $796,508 $864,659
Bank Line of Credit $1,301,010 $1,883,010
Notes Payable to Directors $115,000 $150,376
Current Portion of Long-Term Debt $129,229 $121,234
Accrued Expenses and Taxes $300,252 $460,835
Advance Billings $155,190 $320,279
------------- -------------
Total Current Liabilities $2,797,189 $3,800,393
------------- -------------
Noncurrent liabilities, all less current portions:
Notes payable to bank $123,688 $187,315
Other long-term installment notes $167,191 $126,195
Deferred income taxes $21,300 $21,300
------------- -------------
Total noncurrent liabilities $312,179 $334,810
------------- -------------
Total liabilities $3,109,368 $4,135,203
------------- -------------
Minority Interest $0 $27
------------- -------------
Total Minority Interest $0 $27
------------- -------------
Shareholders' Equity
- - --------------------
Common stock, no par value, authorized,
stated value of $.01; 1,085,820 shares
issued and outstanding $10,858 $10,858
Additional Paid In Capital $1,236,543 $1,236,543
Retained Earnings (Loss), Prior Years ($668,394) $144,414
Current Year Earnings (Loss) $276,336 ($812,835)
------------- -------------
$855,343 $578,980
Less subscription receivable (Note 8) $10,000 $10,000
------------- -------------
Total Shareholders' Equity $845,343 $568,980
------------- -------------
TOTAL LIABILITIES AND EQUITY $3,954,712 $4,704,210
============================ ============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RESOURCE GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET SALES $2,489,533 $1,996,131 $6,750,814 $4,907,353
- - --------
Cost of Goods Sold $1,657,827 $1,941,992 $4,681,076 $4,296,724
---------- ---------- ---------- ----------
Gross Margin $831,706 $54,139 $2,069,738 $610,629
Selling, General and
and Administrative Expense $595,514 $317,259 $1,625,398 $1,122,604
---------- ---------- ---------- ----------
Operating Income (Loss) $236,192 ($263,120) $444,341 ($511,975)
---------- ---------- ---------- ----------
Other Income (Expense)
Interest Income $73 $4,858 $245 $15,039
Interest(Expense) ($46,204) ($54,906) ($154,133) ($116,090)
Oil & Gas Royalties, After Amort. ($2,761) ($747) ($3,622) ($3,099)
Other ($27) ($11,829) ($7,294) ($4,085)
---------- ---------- ---------- ----------
Total Other Income (Expense) ($48,919) ($62,624) ($164,804) ($108,235)
---------- ---------- ---------- ----------
Minority Interest $27 $0 $0 $0
Provision for Taxes $1,311 $6,831 $3,200 $6,831
---------- ---------- ---------- ----------
NET INCOME 185,989 (332,575) 276,336 (627,041)
- - ---------- ========== ========== ========== ==========
Weighted average number of 1,085,820 1,085,820 1,085,820 1,085,820
Shares Outstanding
Income (Loss) per Common Share:
Income (Loss) before extraordinary $0.17 ($0.31) $0.25 ($0.58)
EARNINGS (LOSS)
---------- ---------- ---------- ----------
PER COMMON SHARE $0.17 ($0.31) $0.25 ($0.58)
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RESOURCE GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CASHFLOW STATEMENT
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
1995 1994
---------- ----------
<S> <C> <C>
Cash Flow From Operating Activities
Net Income (Loss) $276,336 ($627,041)
Adjustments to Reconcile Net Income to Net Cash
Depreciation and Amortization $155,065 $127,015
Loss (Gain) on sale of property and equipment $7,294 $14,562
Write Off land development costs $0 $10,047
Changes in certain assets and liabilities
Decrease (Increase) in Accounts Receivable $370,853 $566,540
Decrease (Increase) in Inventory $273,405 ($456,503)
Decrease (Increase) in Other Current Assets ($20,890) $2,931
Decrease (Increase) in Other Non Current Assets $15,869 $22,656
Increase (Decrease) in Accounts Payable ($68,150) ($19,217)
Increase (Decrease) in Accrued Exp and Taxes ($160,583) ($52,157)
Increase (Decrease) in Advanced Billings ($165,089) $270,664
---------- ----------
Net Cash Provided By Operating Activities $684,110 ($140,503)
- - ----------------------------------------- ---------- ----------
Cash Flows from Investing Activities
Proceeds from sale of real estate $0 $205,909
Proceeds from sale of equipment $83,500 $12,428
Capital expenditures for property and equipment ($106,323) ($93,179)
(Increase) Decrease in other long term assets $0 $0
(Increase) Decrease in Other Investments $0 $0
---------- ----------
Net Cash Used In Investing Activities ($22,823) $125,158
- - ------------------------------------- ---------- ----------
Cash Flows from Financing Activities
Principal Payments of Debt Obligations ($107,243) ($74,277)
Proceeds from change in Line of Credit, net ($582,000) $79,183
Repayment of advances from directors ($35,376) $0
---------- ----------
Net Cash Used In Financing Activities ($724,619) $4,906
- - ------------------------------------- ---------- ----------
Net Increase (Decrease) in Cash ($63,332) ($10,439)
Cash, Beginning of Period $65,224 $205,889
---------- ----------
CASH, END OF PERIOD $1,892 $195,450
- - ------------------- ========== ==========
</TABLE>
Resource General and its Subsidiaries paid $154,133 in cash for interest expense
in 1995 and $116,090 in 1994.
The accompanying notes are an integral part of the financial statements.
6
<PAGE> 7
PART I - FINANCIAL INFORMATION
ITEM 1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1. BASIS OF FINANCIAL PRESENTATION
- - ---------------------------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles (GAAP) for interim
financial information and with the instructions to FORM 10-QSB and Item 310(b)
of Regulation SB. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
The accounting policies followed by Resource General Corporation (the Company),
are set forth in Note 1 to the financial statements in the Company's 1994 FORM
10-K.
In the opinion of management, the accompanying unaudited consolidated financial
statements reflect all adjustments which are necessary for a fair presentation
of the financial results. The results of the operations for the nine month
period ended September 30, 1995 are not necessarily indicative of the results
to be expected for the whole year.
In prior years, the Company filed interim reports (FORM 10Q) classifying
certain expenses as selling, general and administrative expenses while filing
the FORM 10K with those same expenses as part of cost of sales. Management
feels the FORM 10K classification is more consistant with GAAP and will use the
latter classification for both FORM 10QSB and FORM 10KSB. The expense
reclassified to achieve this consistency are wages of certain employees who are
indirectly production related. This expense will be moved from SG&A to COS.
The following recap shows the effect of the reclassification on the income
statement for nine months ending September 30, 1994.
<TABLE>
<CAPTION>
Nine Months Nine Months Three Months Three Months
Ended Ended Ended Ended
As Reported As Adjusted As Reported As Adjusted
Sept. 30, 1994 Sept. 30, 1994 Sept. 30, 1994 Sept. 30, 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net Sales $4,907,353 $4,907,353 $1,996,131 $1,996,131
Cost of Goods Sold 4,154,205 $4,296,724 1,920,950 1,941,992
-------------- -------------- -------------- --------------
Gross Margin $ 753,148 $ 610,629 75,181 54,139
-------------- -------------- -------------- --------------
Gross Margin Percentage 15.35% 12.44% 3.77% 2.71%
Selling, General and
Administrative Expense 1,265,123 1,122,604 338,301 317,259
Other Income (Expense) (108,235) (108,235) (62,624) (62,624)
Provision for Taxes (Expense) (6,831) (6,831) (6,831) (6,831)
-------------- -------------- -------------- --------------
Net Income $ (627,041) $ (627,041) $ (332,575) $ (332,575)
============== ============== ============== ==============
</TABLE>
7
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Note 2. Inventories
- - -------------------
Inventories are valued at the lower of cost (First in, first out basis) or
market. Composition of inventories at September 30, 1995 and December 31, 1994
were as follows.
<TABLE>
<CAPTION>
September 30, 1995 Dec. 31, 1994
------------------- -------------------
<S> <C> <C>
Raw Materials $ 352,043 $ 375,074
Work In Process 369,937 620,311
Finished Goods 0 0
------------------ -------------------
Inventory included
in Current Assets $ 721,980 $ 995,385
------------------ -------------------
</TABLE>
The Company has in stock certain items which are not expected to be utilized or
sold currently. Inventory of $50,000 shown on the balance sheet as a long-term
asset represents an estimate of this portion of total raw materials inventory.
8
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PART I - FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
RECENT EVENTS
- - -------------
Sales increased from $4.9 million in the third quarter 1994 to $6.7 million
through the same period in 1995. The sales increase was a result of a high
volume of orders for hydraulic presses during the fourth quarter in 1994 and
the first quarter in 1995. The majority of the new orders were for presses
that were previously engineered by the company which reduced the amount of time
needed to convert the new orders to shipments.
At the end of the quarter the company has $1.7 million in backlog scheduled to
be shipped by the end of the year. The company's new orders for hydraulic
presses dropped substantially in the second and third quarter of 1995.
However, this drop was more than offset by orders for plastic injection molding
machines. Consequently, the company is able to increase its annual revenue
estimate from $7.0 million in the second quarter Form 10QSB to a current
estimate of $8.0 million.
Gross profits increased from 12% of sales in third quarter 1994 to 31% of sales
in third quarter 1995 or an increase from $610,629 in 1994 to $2,069,738 in
1995. In the third quarter there was a record gross margin of 42% on sales of
$2.4 million. The major cause for the quarter's higher margin is that the
majority of the revenue was from higher margin "C" frame hydraulic presses and
minimal warranty expenses on previously shipped presses. The overall nine
month margin improvement also is attributable to closer control of material
costs as a result of better information from the new integrated business
system, and increased manufacturing efficiencies.
Sales, General and Administrative (SG & A) expenses, as a percent of sales,
increased by 1% for the nine months ended September 30, 1995 over the same
period in 1994. The increase in SG & A was attributable to increased
engineering costs (R&D) on the development of a new 30 ton insert molding
machine, participation at a major trade show to introduce the new machine, and
company training expenses on the new integrated business system.
9
<PAGE> 10
Operating income for the third quarter of 1995 is $236,192 as compared to a
loss of $263,120 during the third quarter of 1994. Year to date operating
income at the end of the third quarter 1995 of $444,341 compared to a loss of
$511,975 for the same period in 1994. The increase in profitability is a
result of increased sales and improved gross profit margins as previously
discussed.
Net income for the year has improved to $276,336 or 4% of sales at September
30, 1995 from a loss of $627,041 or 13% of sales at September 30, 1994.
The company expects the fourth quarter will break even due to a decline of
scheduled shipments. In addition, the scheduled shipments are largely composed
of injection molding machines which have lower margins than hydraulic presses.
LIQUIDITY & CAPITAL RESOURCES
- - -----------------------------
The company had a deficit working capital position of $41,214 as of September
30, 1995. This is in contrast to a deficit working capital position of
$301,000 as of June 30, 1995 and deficit of $357,717 as of December 31, 1994.
The company believes that as it converts its backlog to orders and continues to
generate higher gross profit margins, the company's working capital position
will continue to improve.
The Company renegotiated and renewed the current bank agreement through April
1996. The company is negotiating and has received proposals from two banks for
new bank agreements that will enhance the ability to fund future growth. The
Board of Directors continues to explore alternatives to increase
capitalization.
10
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The exhibits required to be filed herewith are set forth below.
No reports were filed on FORM 8-K for the quarter for which
this report is filed.
Exhibit 27 - Financial Data Schedule
ITEM 4. Submission of Matters to a Vote of Security Holders
On July 24, 1995, the Company held its 1995 annual meeting of
shareholders. The shareholders voted on the election of three directors to
three-year terms. Richard R. Corna, Terry L. Sanborn and Donald S. Boston, Jr.
were nominated by the Board of Directors and elected to three-year terms to
expire at the 1998 annual meeting of shareholders. Lyman Brownfield, Robert S.
Ryan, Howard Daniel Smith, Charles T. Sherman, and Robert Binsky continued to
hold office as directors of the Company after the meeting.
SIGNATURES
IN ACCORDANCE WITH THE REQUIREMENTS OF THE EXCHANGE ACT, THE REGISTRANT HAS
CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED.
RESOURCE GENERAL CORPORATION,
AN OHIO CORPORATION
DATE: NOVEMBER 1, 1995 BY: \S\ ROBERT S. RYAN
------------------------- ---------------------------
ROBERT S. RYAN
ACTING PRESIDENT
DATE: NOVEMBER 1, 1995 BY: \S\ CHARLES T. SHERMAN
------------------------- ---------------------------
CHARLES T. SHERMAN
VICE PRESIDENT OF OPERATIONS
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,892
<SECURITIES> 0
<RECEIVABLES> 1,944,366
<ALLOWANCES> 0
<INVENTORY> 671,980
<CURRENT-ASSETS> 2,755,976
<PP&E> 1,617,698
<DEPRECIATION> 797,270
<TOTAL-ASSETS> 3,954,712
<CURRENT-LIABILITIES> 2,797,189
<BONDS> 290,879
<COMMON> 10,858
0
0
<OTHER-SE> 844,485
<TOTAL-LIABILITY-AND-EQUITY> 3,954,712
<SALES> 6,750,814
<TOTAL-REVENUES> 6,750,814
<CGS> 4,681,076
<TOTAL-COSTS> 4,681,076
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 154,133
<INCOME-PRETAX> 279,537
<INCOME-TAX> 3,200
<INCOME-CONTINUING> 276,337
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 276,336
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
