SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended Commission File No.
September 30, 1995 0-12392
RAWSON-KOENIG, INC.
(Exact name of registrant as specified in its charter)
Texas 74-1957377
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2301 Central Parkway, Houston, Texas 77092
(Address of principal executive (Zip Code)
offices)
(713) 688-4414
Registrant's telephone number, including area code
__________________________________________________________________________
Former name, former address, and former fiscal year, if changed since last
report.
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 REGISTRANTS
The number of shares outstanding of the Registrant's common stock as of
September 30, 1995: 3,901,190 shares of common stock.
1
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Rawson-Koenig, Inc.
Condensed Balance Sheets
(Unaudited)
(in thousands)
September 30, December 31,
1995 1994
Assets
Current assets:
Cash and cash equivalents $ 192 $ 193
Accounts receivable, net 1,529 1,609
Inventories:
Raw materials 1,730 1,526
Work in process 1,605 1,265
Finished goods 726 774
Prepayments and other 196 164
Total current assets 5,978 5,531
Property, plant and equipment, at cost:
Land and building 3,432 3,305
Machinery and equipment 5,378 5,069
Accumulated depreciation
and amortization (5,100) (4,816)
Property, plant and equipment, net 3,710 3,558
Total assets $ 9,688 $ 9,089
The accompanying notes are an integral part of these
financial statements.
2
Rawson-Koenig, Inc.
Condensed Balance Sheets, continued
(Unaudited)
(in thousands, except share amounts)
September 30, December 31,
1995 1994
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $ 212 $ 204
Current portion of capital lease
obligation 32 30
Accounts payable 629 651
Accrued expenses 879 837
Income taxes payable 50 233
Total current liabilities 1,802 1,955
Long-term debt, less current portion 1,930 1,829
Capital lease obligation, less current
portion 3 27
Total liabilities 3,735 3,811
Shareholders' equity:
Preferred stock, $10 par value, 1,000,000
shares authorized, none issued
Common stock, no par, $1,000 stated value,
5,000,000 shares authorized, 3,901,190
shares issued and outstanding 1 1
Additional paid-in capital 4,529 4,529
Retained earnings 1,423 748
Total shareholders' equity 5,953 5,278
Total liabilities and shareholders'
equity $ 9,688 $ 9,089
The accompanying notes are an integral part of these
financial statements.
3
Rawson-Koenig, Inc.
Condensed Statements of Operations
(Unaudited)
(in thousands, except per share data and average shares outstanding)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Sales $ 4,380 $ 4,196 $ 14,190 $ 12,960
Cost of sales 3,576 3,266 11,161 10,230
Gross profit 804 930 3,029 2,730
Selling, general and
administrative expenses 638 571 2,033 1,598
Income from operations 166 359 996 1,132
Other income (expense):
Interest expense (53) (49) (147) (164)
Other, net 59 19 141 56
Income before income taxes 172 329 990 1,024
Income taxes:
Federal 36 60 265 182
State 10 21 50 55
Net income $ 126 $ 248 $ 675 $ 787
Net income per share $ .03 $ .06 $ .17 $ .20
Average shares outstanding 3,901,190 3,901,190 3,901,190 3,901,190
The accompanying notes are an integral part of these
financial statements.
4
Rawson-Koenig, Inc.
Condensed Statements of Cash Flows
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1995 1994
Cash flow from operating activities:
Net income $ 675 $ 787
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 349 335
Change in assets and liabilities, net (611) (152)
Total adjustments (262) 183
Net cash provided by operating activities 413 970
Cash flows from investing activities:
Purchase of property and equipment, net (501) (146)
Cash flows from financing activities:
Increase (decrease) in borrowings, net 87 (733)
Net increase (decrease) in cash and cash
equivalents (1) 91
Cash and cash equivalents at beginning
of period 193 167
Cash and cash equivalents at end
of period $ 192 $ 258
Supplemental cash flow disclosure:
Income taxes paid $ 575 $ 154
Interest paid $ 147 $ 164
The accompanying notes are an integral part of these
financial statements.
5
Rawson-Koenig, Inc.
Notes to Condensed Financial Statements
September 30, 1995 and 1994
(Unaudited)
1. Nature of Organization
Rawson-Koenig, Inc. (the "Registrant"), a Texas corporation, designs,
manufactures and markets certain equipment for light trucks. Its chief products
are truck tool boxes, truck service bodies, winches and truck mounted cranes.
2. Basis for Preparation of the Condensed Financial Statements
The condensed financial statements for the three months and nine months
ended September 30, 1995 and 1994, have been prepared by the Registrant and are
unaudited. Certain information and footnote disclosures, including significant
accounting policies, normally included in financial statements prepared in
accordance with generally accepted accounting principles, have beeen condensed
or omitted; however, the Registrant believes that the disclosures are adequate
to make the information presented not misleading. All the adjustments which
are, in the opinion of management, necessary for a fair statement of the results
of the interim periods have been included. These condensed financial statements
should be read in conjunction with the financial statements and the notes
thereto included in the Registrant's latest Annual Report to Shareholders on
Form 10-K.
3. Income Taxes
The provisions for federal and state income tax for the three months and
nine months ended September 30, 1995 and 1994, were computed by applying the
estimated effective annual tax rate to income before income taxes.
4. Debt Agreement
Effective April 21, 1995, the Registrant amended and restated its loan
agreement with its primary lender. The restated agreement extended the maturity
date of the line of credit to April 30, 1997, and reduced the interest rate on
amounts outstanding under the line of credit to the bank's prime rate of
interest (8.75% at September 30, 1995). Interest on the line of credit remains
payable monthly and the maximum amount of credit available under the line
remains at $2,200,000. The $412,000 balance outstanding under the line at
September 30, 1995, is included in long-term debt in the accompanying balance
sheet.
The restated agreement also lowered the rate of interest on the Registrant's
Fort Worth real estate loan to the bank's prime rate. The loan, which had a
balance of $250,644 at September 30, 1995, is payable in monthly installments of
$5,830 plus interest and matures in April 1999.
6
Rawson-Koenig, Inc.
Notes to Condensed Financial Statements, continued
September 30, 1995 and 1994
(Unaudited)
4. Debt Agreement, continued
Effective September 21, 1995, the restated agreement was amended to increase
the borrowing maximum on the Registrant's advancing term equipment loan. Under
the amended restated agreement, the Registrant may borrow up to $1,500,000 to
finance equipment purchases through August 31, 1996. Any borrowings outstanding
under the agreement as of August 31, 1996, will be converted to a five year term
loan and will be due in equal monthly principal payments plus interest at the
bank's prime rate. As of September 30, 1995, there were no amounts outstanding
under this facility.
5. Commitment
The Registrant has entered into an agreement with an equipment manufacturer
to purchase metal processing equipment at an approximate cost of $1,125,000.
The equipment is scheduled to be delivered and installed in June 1996. The
purchase agreement requires the Registrant to make installment payments into an
escrow account as the machine is being built. It is estimated that the
Registrant will make the following escrow payments: $112,500 in October 1995,
$112,500 in January 1996, and $787,500 in June 1996. A final payment of
$112,500 will be due to the manufacturer after the machine is installed and
operational.
7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following table sets forth for the periods indicated (i) the percentages
which certain items reflected in the statements of operations bear to total
sales of the Registrant and (ii) the pecentage increase (decrease) of such items
as compared to the corresponding prior year period.
Percentage of Percentage of
Sales Sales
3 Months Ended Percentage 9 Months Ended Percentage
September 30, Increase September 30, Increase
1995 1994 (Decrease) 1995 1994 (Decrease)
Sales 100.0 100.0 4.4 100.0 100.0 9.5
Cost of sales 81.6 77.8 9.5 78.7 78.9 9.1
Selling, general
and administrative
expenses 14.6 13.6 11.7 14.3 12.3 27.2
Interest expense 1.2 1.2 8.2 1.0 1.3 (10.4)
Other income, net (1.3) (.4) 210.5 (1.0) (.4) 151.8
Income before
income taxes 3.9 7.8 (47.7) 7.0 7.9 (3.3)
Income taxes 1.0 1.9 (43.2) 2.2 1.8 32.9
Net income 2.9 5.9 (49.2) 4.8 6.1 (14.2)
Results of Operations
Sales increased approximately $184,000 (4.4%) during the three months ended
September 30, 1995, and increased approximately $1,230,000 (9.5%) during the
nine months ended September 30, 1995, compared to the same periods of 1994.
These increases resulted primarily from the Registrant's intensified marketing
efforts in several territories.
Cost of sales as a percentage of sales increased from 77.8% to 81.6% for the
three months ended September 30, 1994 and 1995, respectively. This increase was
due primarily to increases in material costs. Cost of sales as a percentage of
sales decreased from 78.9% to 78.7% for the nine months ended September 30, 1994
and 1995, respectively. This decrease was due primarily to the Registrant's
continued program of upgrading manufacturing equipment and refining production
methods.
Selling, general and administrative expenses increased 11.7% for the three
months ended September 30, 1995 and increased 27.2% for the nine months ended
8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations, continued
September 30, 1995, compared to the same periods of 1994. These increases were
primarily due to increases in insurance costs and payroll-related expenses.
Additionally, during the nine months ended September 30, 1995, approximately
$230,000 of office improvements and repairs were incurred of which $106,000 was
expensed. Approximately $26,000 of these repairs were expensed during the three
months ended September 30, 1995.
Interest expense increased 8.2% for the three months ended September 30,
1995, compared to the same period of 1994. This increase was primarily due to
higher average borrowings during 1995. Interest expense decreased 10.4% for the
nine months ended September 30, 1995, compared to the same period of 1994. This
decrease was primarily due to lower average borrowings during the first five
months of 1995.
Income taxes decreased 43.2% for the three months ended September 30, 1995,
compared to the same period of 1994. The decrease was primarily due to the
decrease in income before income taxes for the three months ended September 30,
1995 compared to the same period of 1994. Income taxes increased 32.9% for the
nine months ended September 30, 1995, compared to the same period of 1994. This
increase was due primarily to the utilization of alternative minimum tax credit
carryforwards during 1994 that resulted in a lower effective tax rate for 1994
compared to 1995.
Financial Condition
The Registrant generated approximately $413,000 in cash from operations
during the nine months ended September 30, 1995. The Registrant plans to fund
future operations from cash on hand, cash from operations and use of its credit
facility, which had an available line of credit of approximately $1,788,000 at
September 30, 1995, based on the applicable borrowing base calculation.
In addition to the line of credit, the Registrant has an agreement with a
bank to borrow up to $1,500,000 to finance equipment purchases. At September
30, 1995, there were no amounts outstanding under this agreement.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the nine months ended September
30, 1995.
9
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.
RAWSON-KOENIG, INC.
Date: October 26, 1995 /s/ Thomas C. Rawson
Thomas C. Rawson
Chairman of the Board
Date: October 26, 1995 /s/ Catherine A. Rawson
Catherine A. Rawson
Principal Financial Officer
Date: October 26, 1995 /s/ Leslie T. Horvath
Leslie T. Horvath
Controller
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 192
<SECURITIES> 0
<RECEIVABLES> 1529
<ALLOWANCES> 0
<INVENTORY> 4061
<CURRENT-ASSETS> 5978
<PP&E> 8810
<DEPRECIATION> 5100
<TOTAL-ASSETS> 9688
<CURRENT-LIABILITIES> 1802
<BONDS> 1933
<COMMON> 1
0
0
<OTHER-SE> 5952
<TOTAL-LIABILITY-AND-EQUITY> 9688
<SALES> 14190
<TOTAL-REVENUES> 14190
<CGS> 11161
<TOTAL-COSTS> 11161
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 147
<INCOME-PRETAX> 990
<INCOME-TAX> 315
<INCOME-CONTINUING> 675
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 675
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
