<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 MARCH 31, 1996 Comm. File No. 0-8115
Resource General Corporation
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(Exact name of Small Business Issuer as specified in its charter)
<TABLE>
<S> <C>
Ohio 31-0737351
---- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
2365 Scioto Harper Drive, Columbus, Ohio 43204
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(Address of principal executive offices)
Registrant's telephone number, including area code: (614) 276-4877
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 practicable date: 1,085,820 common shares, without
par value, outstanding as of March 31, 1996.
1
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RESOURCE GENERAL CORPORATION
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INDEX
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<TABLE>
<CAPTION>
<S> <C>
Part I. Financial Information Page No.
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets for March 31, 1996 3 and 4
and December 31, 1995
Consolidated Statement of Income for the three 5
months ended March 31, 1996 and March 31, 1995
Consolidated Statement of Cash Flows for the 6
three months ended March 31, 1996 and
March 31, 1995
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 and 9
Part II. Other Information 9, 10 and 11
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RESOURCE GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
March 31 Dec. 31
ASSETS 1996 1995
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<S> <C> <C>
Current Assets
- --------------
Cash $5,808 $122,746
Accounts Receivable $1,746,331 $1,277,415
Inventories $1,185,844 $871,022
Deferred Income Taxes $20,300 $22,400
Other Current Assets $81,221 $57,696
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Total Current Assets $3,039,504 $2,351,279
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Property and Equipment, at cost
Office Equipment $390,477 $389,312
Manufacturing equipment $875,306 $872,250
Leasehold improvements $239,320 $232,809
Vehicles $85,366 $81,600
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$1,590,469 $1,575,971
Less: Accumulated Depreciation & Amortization ($828,005) ($804,185)
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Net Property and Equipment $762,464 $771,786
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Other Non-Current Assets
Inventory, Longterm Portion $50,000 $50,000
Oil & Gas Royalty Interests, Net of Amort. $10,754 $13,004
Land Held for Investment $169,720 $169,720
Goodwill, net (Note 3) $103,973 $110,904
OTHER NONCURRENT ASSETS $24,835 $47,754
- ----------------------- ---------- ----------
Total Other Non-Current Assets $359,282 $391,382
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TOTAL ASSETS $4,161,250 $3,514,447
- ------------ ========== ==========
</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>
March 31 Dec. 31
LIABILITIES 1996 1995
- ----------- ---------- ----------
<S> <C>
Accounts Payable $988,747 $792,694
Bank Line of Credit $1,037,849 $532,849
Notes Payable to Directors $60,000 $87,500
Current Portion of Long-Term Debt $136,390 $130,444
Current Portion of Capital Lease Oblig. $15,299 $14,814
Income Tax Payable $0 $5,000
Accrued Expenses and Taxes $244,424 $414,323
Advance Billings $265,372 $229,080
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Total Current Liabilities $2,748,081 $2,206,704
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Noncurrent liabilities, all less current portions:
Notes payable to bank $374,509 $383,333
Capital Lease Obligations $55,782 $59,794
Other long-term installment notes $87,890 $95,751
Deferred income taxes $21,300 $23,400
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Total noncurrent liabilities $539,481 $562,278
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Total liabilities $3,287,562 $2,768,982
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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 ($491,936) ($668,421)
Current Year Earnings (Loss) $128,222 $176,485
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$883,687 $755,465
Less subscription receivable (Note 8) $10,000 $10,000
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Total Shareholders' Equity $873,687 $745,465
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TOTAL LIABILITIES AND EQUITY $4,161,250 $3,514,447
- ---------------------------- ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RESOURCE GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1996 1995
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<S> <C> <C>
NET SALES $1,796,415 $2,151,077
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Cost of Goods Sold $1,248,024 $1,608,699
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Gross Margin $548,392 $542,378
Selling, General and
and Administrative Expense $384,985 $441,709
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Operating Income (Loss) $163,407 $100,669
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Other Income (Expense)
Interest Income $340 $90
Interest(Expense) ($33,324) ($53,971)
Oil & Gas Royalties, After Amort. ($1,088) ($1,030)
Other ($1,113) $0
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Total Other Income (Expense) ($35,185) ($54,911)
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Income Before Income Taxes $128,222 $45,758
Minority Interest $0 $27
Provision for Taxes $0 $1,889
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NET INCOME 128,222 43,896
- ---------- ========== ==========
Weighted average number of 1,085,820 1,085,820
Shares Outstanding
Income (Loss) per Common Share:
Income (Loss) before extraordinary $0.12 $0.04
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EARNINGS (LOSS)
per COMMON SHARE $0.12 $0.04
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RESOURCE GENERAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED CASHFLOW STATEMENT
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1996 1995
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<S> <C> <C>
Cash Flow From Operating Activities
Net Income (Loss) 128,222 $43,869
Adjustments to Reconcile Net Income to Net Cash
Depreciation and Amortization $52,571 $49,416
Loss (Gain) on sale of property and equipment $1,113 $0
Changes in certain assets and liabilities
Decrease (Increase) in Accounts Receivable ($468,916) $455,528
Decrease (Increase) in Inventory ($314,822) $218,584
Decrease (Increase) in Other Current Assets ($21,425) ($18,217)
Decrease (Increase) in Other Non Current Assets $22,919 $14,735
Increase (Decrease) in Accounts Payable $196,053 ($82,583)
Increase (Decrease) in Income Tax Payable ($5,000) $0
Increase (Decrease) in Deferred Income Taxes ($2,100) $0
Increase (Decrease) in Accrued Exp and Taxes ($169,899) ($210,553)
Increase (Decrease) in Advanced Billings $36,292 ($68,705)
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Net Cash Provided By Operating Activities ($544,992) $402,074
- ----------------------------------------- --------- ---------
Cash Flows from Investing Activities
Proceeds from sale of equipment $0 $0
Capital expenditures for property and equipment ($35,180) ($39,940)
(Increase) Decrease in other long term assets $0 $0
(Increase) Decrease in Other Investments $0 $0
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Net Cash Used In Investing Activities ($35,180) ($39,940)
- ------------------------------------- --------- ---------
Cash Flows from Financing Activities
Principal Payments of Debt Obligations ($36,450) ($43,871)
Change in Line of Credit, net $505,000 ($300,000)
Proceeds from Notes Payable $22,184 $0
Repayment of advances from directors ($27,500) ($376)
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Net Cash Used In Financing Activities $463,234 ($344,247)
- ------------------------------------- --------- ---------
Net Increase (Decrease) in Cash ($116,938) $17,887
Cash, Beginning of Period $122,746 $65,224
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CASH, END OF PERIOD $5,808 $83,111
- ------------------- ========= =========
</TABLE>
Resource General and its Subsidiaries paid $33,324 in
cash for interest expense in 1996 and $53,971 in 1995.
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 2 to the financial statements in the Company's 1995 FORM
10-KSB.
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 three month
period ended March 31, 1996 are not necessarily indicative of the results to be
expected for the whole year.
NOTE 2. INVENTORIES
Inventories are valued at the lower of cost (First in, first out basis) or
market. Composition of inventories at March 31, 1996 and December 31, 1995
were as follows.
<TABLE>
<CAPTION>
March 31, 1996 Dec. 31, 1995
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<S> <C> <C>
Raw Materials $ 436,999 $351,844
Work In Process 798,845 569,178
Finished Goods 0 0
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Inventory included
in Current Assets $1,235,844 $921,022
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</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.
7
<PAGE> 8
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 declined from $2.1 million in 1995 to $1.7 million in 1996. The decline
in first quarter sales is not indicative of sales future activity. At the end
of the quarter the Company had an all time high backlog of $4.0 million. The
Company is forecasting a record $9.0 million in shipments for the year.
New orders for the first quarter were $3.1 million which also set a quarterly
record for new orders. The Company's strategy of increasing the sale of its
plastic machinery to compensate for the swings in hydraulic press orders paid
dividends in the first quarter. New orders for hydraulic presses decreased by
22% from $2.30 million to $1.78 million; while orders for injection molding
machines increased from $592,977 to $1.37 million.
Gross profit margin exceeded 30.5%. This is the third straight improvement
from 25% in 1995 and 24% in 1994. A major reason for improvement was the
increased margins in the injection molding machines to 25%. In previous years
the margin for injection molding machines rarely exceeded 20%. As the Company
increases the number of molding machines it produces, it will continue to gain
and improve manufacturing efficiency which will result in profit margin for
standard machines increasing to 25-28%.
S.G. & A. expenses were reduced by $56,724 from first quarter 1995. The
reduction was due to overall cost control rather than any one specific item.
Operating income increased for the third consecutive year. Operating income in
1996 is $163,408 or 9% of sales. In 1995 operating income was $100,699 or 4.6%
of sales and a loss of $47,449 in 1994. Increasing gross margins and reduced
SG & A costs acted in concert to generate the percent of sales and actual
dollar increase of operating income.
Other expenses is comprised primarily of interest expense. Interest expense
dropped from $53,971 to $33,324. The drop in interest expense is related to
better cash management including faster collection of account receivables.
Net income increased from $43,896 or 2% of sales to $128,222 or 7% of sales.
8
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LIQUIDITY AND CAPITAL RESOURCES
The Company has dramatically increased its working capital from a deficit of
$411,000 in the first quarter 1995 to a positive $291,423. The increase in
working capital is a result of the reduction of current liabilities from $3.2
million in 1995 to $2.7 million in 1996. The largest reduction in the Company
was a reduction in the line of credit from $1.5 million to $1.0 million in
1996. Overall current assets increased by $234,000.
The Company believes that the $702,400 improvement in working capital was a
result of better cash management and improved gross margins. The Company
further believes that if it can meet its projected sales schedules it will be
able to stabilize and improve working capital throughout the year.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The exhibits required to be filed herewith are set forth below.
<TABLE>
<CAPTION>
Exhibit Number Description
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<S> <C>
27 Financial Data Schedule
</TABLE>
On April 9, 1996, the Company filed a Form 8-K to report the execution of two
stock purchase agreements, the consummation of which will give an association
of five individuals (the "Purchase Group") more than 50% beneficial ownership
of the Company's Common Stock (the "Proposed Acquisitions"). The members of
the Purchase Group include directors of the Company and executive officers of
PH Hydraulics and Automation, Inc., a wholly-owned subsidiary of the Company.
In accordance with applicable law, the Proposed Acquisitions must be authorized
by the shareholders of the Company. The Company anticipates that this Proposed
Acquisition will be presented to the shareholders at a special meeting duly
held for such purpose in May 1996.
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: MAY 15, 1996 BY: \S\ ROBERT S. RYAN
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ROBERT S. RYAN
ACTING PRESIDENT
DATE: MAY 15, 1996 BY: \S\ CHARLES T. SHERMAN
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CHARLES T. SHERMAN
VICE PRESIDENT OF OPERATIONS
9
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description Page #
- -------------- ----------- ------
<S> <C> <C>
27 Financial Data Schedule 11
</TABLE>
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 5,808
<SECURITIES> 0
<RECEIVABLES> 1,746,331
<ALLOWANCES> 0
<INVENTORY> 1,185,844
<CURRENT-ASSETS> 3,039,504
<PP&E> 1,590,469
<DEPRECIATION> 828,005
<TOTAL-ASSETS> 4,161,250
<CURRENT-LIABILITIES> 2,748,081
<BONDS> 518,181
<COMMON> 10,858
0
0
<OTHER-SE> 872,829
<TOTAL-LIABILITY-AND-EQUITY> 4,161,250
<SALES> 1,796,415
<TOTAL-REVENUES> 1,796,415
<CGS> 1,248,024
<TOTAL-COSTS> 1,248,024
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,324
<INCOME-PRETAX> 128,222
<INCOME-TAX> 0
<INCOME-CONTINUING> 128,222
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 128,222
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
