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, 1996 0-12392
RAWSON-KOENIG, INC.
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(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
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(Address of principal executive offices) (Zip Code)
(713) 688-4414
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(Registrant's telephone number, including area code)
N/A
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(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, 1996: 3,901,190 shares of common stock.
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<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
Rawson-Koenig, Inc.
Condensed Balance Sheets
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents $ 676 $ 315
Accounts receivable, net 1,652 1,714
Inventories:
Raw materials 1,350 1,263
Work in process 1,401 1,609
Finished goods 746 743
Prepayments and other 185 174
-------- --------
Total current assets 6,010 5,818
-------- --------
Property, plant and equipment, at cost:
Land and buildings 3,811 3,695
Machinery and equipment 5,554 5,419
Accumulated depreciation and amortization (5,586) (5,221)
-------- --------
Property, plant and equipment, net 3,779 3,893
-------- --------
Other assets 225 113
-------- --------
Total assets $ 10,014 $ 9,824
======== ========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
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<PAGE>
Rawson-Koenig, Inc.
Condensed Balance Sheets, continued
(Unaudited)
(in thousands, except share amounts)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
<S> <C> <C>
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 225 $ 215
Current portion of capital lease
obligation 3 27
Accounts payable 533 438
Accrued expenses 886 884
Income taxes payable 72 61
-------- --------
Total current liabilities 1,719 1,625
Long-term debt, less current portion 1,293 2,095
-------- --------
Total liabilities 3,012 3,720
-------- --------
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 2,472 1,574
-------- --------
Total shareholders' equity 7,002 6,104
-------- --------
Total liabilities and shareholders' equity $ 10,014 $ 9,824
======== ========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
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<PAGE>
Rawson-Koenig, Inc.
Condensed Statements of Operations
(Unaudited)
(in thousands, except per share data and average shares outstanding)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales $ 4,827 $ 4,380 $ 15,425 $ 14,190
Cost of sales 3,671 3,576 11,788 11,161
--------- --------- --------- ---------
Gross profit 1,156 804 3,637 3,029
Selling, general and
administrative expenses 722 638 2,182 2,033
--------- --------- --------- ---------
Income from operations 434 166 1,455 996
Other income (expense):
Interest expense (34) (53) (113) (147)
Other, net 9 59 13 141
--------- --------- --------- ---------
Income before income taxes 409 172 1,355 990
Income taxes:
Federal 115 36 391 265
State 20 10 66 50
--------- --------- --------- ---------
Net income $ 274 $ 126 $ 898 $ 675
========= ========= ========= =========
Net income per share $ .07 $ .03 $ .23 $ .17
========= ========= ========= =========
Average shares outstanding 3,901,190 3,901,190 3,901,190 3,901,190
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
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<PAGE>
Rawson-Koenig, Inc.
Condensed Statements of Cash Flows
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1995
------ ------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 898 $ 675
------ ------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 370 349
Change in assets and liabilities, net 165 (611)
------ ------
Total adjustments 535 (262)
------ ------
Net cash provided by operating activities 1,433 413
Cash flows from investing activities:
Purchase of property and equipment, net (256) (501)
Cash flows from financing activities:
Increase (decrease) in borrowings, net (816) 87
------ ------
Net increase (decrease) in cash and cash
equivalents 361 (1)
Cash and cash equivalents at beginning
of period 315 193
------ ------
Cash and cash equivalents at end of period $ 676 $ 192
====== ======
Supplemental cash flow disclosure:
Income taxes paid $ 410 $ 575
====== ======
Interest paid $ 114 $ 147
====== ======
</TABLE>
The accompanying notes are an integral part of these
financial statements.
-5-
<PAGE>
Rawson-Koenig, Inc.
Notes to Condensed Financial Statements
September 30, 1996 and 1995
(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, 1996 and 1995, 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
been 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 taxes for the three months
and nine months ended September 30, 1996 and 1995, were computed by
applying the estimated effective annual tax rate to income before income
taxes.
4. Debt Agreement
Effective May 28, 1996, the Registrant amended its Letter Loan
Agreement with its primary lender. The amended agreement extended the
maturity date of the revolving line of credit to April 30, 1998. Interest
on the revolving line of credit remains payable monthly at the bank's prime
rate and the maximum amount of credit available under the line remains at
$2,200,000. At September 30, 1996, the revolving line of credit had a
balance of zero.
The amended agreement also provided the Registrant with an advancing
term equipment loan under which the Registrant may borrow up to $1,000,000
to finance equipment purchases through April 30, 1997. Any borrowings
outstanding under this advancing term equipment loan as of April 30, 1997,
will be converted to a five year term loan that will be due in sixty equal
-6-
<PAGE>
monthly principal payments beginning May 30, 1997, plus interest at the
bank's prime rate. As of September 30, 1996, there were no amounts
outstanding under this advancing term equipment loan. The Registrant's
other advancing term equipment loan agreement, that allowed for borrowings
up to $1,500,000, expired unused on August 31, 1996.
5. Commitments
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
1996. The purchase agreement requires the Registrant to make installment
payments into an escrow account as the machine is being built. As of
September 30, 1996, the Registrant had made escrow payments totaling
approximately $225,000 that are included as other assets in the balance
sheet. In October 1996, the Registrant made an additional escrow payment
of approximately $787,000. The escrowed amounts will transfer to the
manufacturer after the machine is installed. A final payment of
approximately $113,000 will be due to the manufacturer after the machine is
installed and operating to the satisfaction of the Registrant.
-7-
<PAGE>
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 percentage increase
(decrease) of such items as compared to the corresponding prior year
period.
<TABLE>
<CAPTION>
Percentage of Percentage of
Sales Sales
3 Months Ended Percentage 9 Months Ended Percentage
September 30, Increase September 30, Increase
1996 1995 (Decrease) 1996 1995 (Decrease)
----- ----- ---------- ----- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Sales 100.0 100.0 10.2 100.0 100.0 8.7
Cost of sales 76.0 81.6 2.7 76.4 78.7 5.6
Selling, general
and administrative
expenses 15.0 14.6 13.2 14.2 14.3 7.3
Interest expense .7 1.2 (35.9) .7 1.0 (23.1)
Other income, net (.2) (1.3) (84.8) (.1) (1.0) (90.8)
Income before
income taxes 8.5 3.9 137.8 8.8 7.0 36.9
Income taxes 2.8 1.0 193.5 3.0 2.2 45.1
Net income 5.7 2.9 117.5 5.8 4.8 33.0
</TABLE>
Results of Operations
Sales increased approximately $447,000 (10.2%) during the three months
ended September 30, 1996, and increased approximately $1,235,000 (8.7%)
during the nine months ended September 30, 1996, compared to the same
periods of 1995. These increases resulted primarily from the Registrant's
intensified marketing efforts in several territories.
Cost of sales as a percentage of sales decreased from 81.6% to 76.0%
for the three months ended September 30, 1995 and 1996, respectively, and
decreased from 78.7% to 76.4% for the nine months ended September 30, 1995
and 1996, respectively. These decreases were due primarily to decreases in
material costs during the three months ended September 30, 1996, compared
to the same period of 1995, and Management's continued program of upgrading
equipment and refining production methods.
Selling, general and administrative expenses increased 13.2% for the
three months ended September 30, 1996, and increased 7.3% for the nine
-8-
<PAGE>
months ended September 30, 1996, compared to the same periods of 1995.
These increases were primarily due to increases in payroll-related
expenses.
Interest expense decreased 35.9% for the three months ended September
30, 1996, and decreased 23.1% for the nine months ended September 30, 1996,
compared to the same periods of 1995. These decreases were primarily due
to lower average borrowings during 1996.
Income taxes increased 193.5% for the three months ended September 30,
1996, and increased 45.1% for the nine months ended September 30, 1996,
compared to the same periods of 1995. These increases were due primarily
to the increases in income before income taxes.
Financial Condition
The Registrant generated approximately $1,433,000 in cash from
operations during the nine months ended September 30, 1996. The Registrant
plans to fund future operations from cash on hand, cash from operations and
use of its credit facility, which had an available revolving line of credit
of $2,200,000 at September 30, 1996.
In addition to the revolving line of credit, the Registrant has an
agreement with its bank to borrow up to an aggregate of $1,000,000 to
finance equipment purchases. At September 30, 1996, there were no amounts
outstanding under this agreement.
In October 1996, the Registrant made an escrow payment of approximately
$787,000 pertaining to the purchase of certain equipment (See Note 5 on
page 7). This payment was made by utilizing cash on hand and by borrowing
$290,000 under the revolving line of credit.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit
Number Description
------- -----------
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the three months ended
September 30, 1996.
-9-
<PAGE>
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 24, 1996 /s/ Thomas C. Rawson
---------------------------
Thomas C. Rawson
Chairman of the Board
/s/ Catherine A. Rawson
---------------------------
Catherine A. Rawson
Principal Financial Officer
/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-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 676
<SECURITIES> 0
<RECEIVABLES> 1,652
<ALLOWANCES> 0
<INVENTORY> 3,497
<CURRENT-ASSETS> 6,010
<PP&E> 9,365
<DEPRECIATION> 5,586
<TOTAL-ASSETS> 10,014
<CURRENT-LIABILITIES> 1,719
<BONDS> 1,293
0
0
<COMMON> 1
<OTHER-SE> 7,001
<TOTAL-LIABILITY-AND-EQUITY> 10,014
<SALES> 15,425
<TOTAL-REVENUES> 15,425
<CGS> 11,788
<TOTAL-COSTS> 11,788
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 113
<INCOME-PRETAX> 1,355
<INCOME-TAX> 457
<INCOME-CONTINUING> 898
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 898
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
