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.:
June 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
June 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>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents $ 293 $ 315
Accounts receivable, net 1,855 1,714
Inventories:
Raw materials 1,205 1,263
Work in process 1,385 1,609
Finished goods 601 743
Prepayments and other 191 174
------- -------
Total current assets 5,530 5,818
------- -------
Property, plant and equipment, at cost:
Land and buildings 3,809 3,695
Machinery and equipment 5,494 5,419
Accumulated depreciation and amortization (5,462) (5,221)
------- -------
Property, plant and equipment, net 3,841 3,893
------- -------
Other assets 225 113
------- -------
Total assets $ 9,596 $ 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>
June 30, December 31,
1996 1995
-------- ------------
<S> <C> <C>
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 222 $ 215
Current portion of capital lease
obligation 11 27
Accounts payable 329 438
Accrued expenses 887 884
Income taxes payable 69 61
------- -------
Total current liabilities 1,518 1,625
Long-term debt, less current portion 1,350 2,095
------- -------
Total liabilities 2,868 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 2,198 1,574
------- -------
Total shareholders' equity 6,728 6,104
------- -------
Total liabilities and shareholders' equity $ 9,596 $ 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 Six Months Ended
June 30, June 30,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales $ 5,562 $ 4,893 $ 10,598 $ 9,810
Cost of sales 4,249 3,807 8,117 7,585
--------- --------- --------- ---------
Gross profit 1,313 1,086 2,481 2,225
Selling, general and
administrative expenses 724 735 1,460 1,395
--------- --------- --------- ---------
Income from operations 589 351 1,021 830
Other income (expense):
Interest expense (35) (49) (79) (94)
Other, net - 41 4 82
--------- --------- --------- ---------
Income before income taxes 554 343 946 818
Income taxes:
Federal 164 91 276 229
State 27 17 46 40
--------- --------- --------- ---------
Net income $ 363 $ 235 $ 624 $ 549
========= ========= ========= =========
Net income per share $ .09 $ .06 $ .16 $ .14
========= ========= ========= =========
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>
Six Months Ended
June 30,
1996 1995
------ ------
<S> <C> <C>
Cash flow from operating activities:
Net income $ 624 $ 549
------ ------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 245 231
Change in assets and liabilities, net 56 (940)
------ ------
Total adjustments 301 (709)
------ ------
Net cash provided by (used in) operating
activities 925 (160)
Cash flows from investing activities:
Purchase of property and equipment, net (193) (408)
Cash flows from financing activities:
Increase (decrease) in borrowings, net (754) 560
------ ------
Net decrease in cash and cash equivalents (22) (8)
Cash and cash equivalents at beginning
of period 315 193
------ ------
Cash and cash equivalents at end of period $ 293 $ 185
====== ======
Supplemental cash flow disclosure:
Income taxes paid $ 278 $ 500
====== ======
Interest paid $ 80 $ 94
====== ======
</TABLE>
The accompanying notes are an integral part of these
financial statements.
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<PAGE>
Rawson-Koenig, Inc.
Notes to Condensed Financial Statements
June 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 six months
ended June 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 six months ended June 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 June 30, 1996, the revolving line of credit had a balance
of zero.
The amended agreement also provides the Registrant with a second
advancing term promissory note under which the Registrant may borrow up to
$1,000,000 to finance equipment purchases through April 30, 1997. Any
borrowings outstanding under the second advancing term promissory note as
of April 30, 1997, will be converted to a five year term loan that will be
due in sixty equal monthly principal payments beginning May 30, 1997, plus
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<PAGE>
interest at the bank's prime rate. As of June 30, 1996, there were no
amounts outstanding under the second advancing term promissory note.
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
1996. The purchase agreement requires the Registrant to make installment
payments into an escrow account as the machine is being built. As of June
30, 1996, the Registrant has made escrow payments totaling approximately
$225,000 that are included as other assets in the balance sheet. It is
estimated that the Registrant will make an additional escrow payment of
approximately $787,500 in 1996 after the machine is approved by the
Registrant for shipment. A final payment of $112,500 will be due to the
manufacturer after the machine is installed and operating to the
satisfaction of the Registrant.
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<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 6 Months Ended Percentage
June 30, Increase June 30, Increase
1996 1995 (Decrease) 1996 1995 (Decrease)
----- ----- ---------- ----- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Sales 100.0 100.0 13.7 100.0 100.0 8.0
Cost of sales 76.4 77.8 11.6 76.6 77.3 7.0
Selling, general
and administrative
expenses 13.0 15.0 (1.5) 13.8 14.2 4.7
Interest expense .6 1.0 (28.6) .7 1.0 (16.0)
Other income, net - (.8) (100.0) - (.8) (95.1)
Income before
income taxes 10.0 7.0 61.5 8.9 8.3 15.6
Income taxes 3.5 2.2 76.9 3.0 2.7 19.7
Net income 6.5 4.8 54.5 5.9 5.6 13.7
</TABLE>
Results of Operations
Sales increased approximately $669,000 (13.7%) during the three months
ended June 30, 1996, and increased approximately $788,000 (8.0%) during the
six months ended June 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 77.8% to 76.4%
for the three months ended June 30, 1995 and 1996, respectively, and
decreased from 77.3% to 76.6% for the six months ended June 30, 1995 and
1996, respectively. These decreases were due primarily to Management's
continued program of upgrading equipment and refining production methods.
Selling, general and administrative expenses decreased 1.5% for the
three months ended June 30, 1996, and increased 4.7% for the six months
ended June 30, 1996, compared to the same periods of 1995. The increase
-8-
<PAGE>
for the six months ended June 30, 1996, was primarily due to increases in
insurance costs and payroll-related expenses. During the three months
ended June 30, 1995, approximately $160,000 of office improvements and
repairs were incurred of which $80,000 was expensed.
Interest expense decreased 28.6% for the three months ended June 30,
1996, and decreased 16.0% for the six months ended June 30, 1996, compared
to the same periods of 1995. These decreases were primarily due to lower
average borrowings during 1996.
Income taxes increased 76.9% for the three months ended June 30, 1996,
and increased 19.7% for the six months ended June 30, 1996, compared to the
same periods of 1995. These increases were due primarily to the increase
in income before income taxes.
Financial Condition
The Registrant generated approximately $925,000 in cash from operations
during the six months ended June 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 June 30, 1996.
In addition to the revolving line of credit, the Registrant has two
agreements with a bank to borrow up to an aggregate of $2,500,000 to
finance equipment purchases. At June 30, 1996, there were no amounts
outstanding under these two agreements.
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 June
30, 1996.
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<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: July 29, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 293
<SECURITIES> 0
<RECEIVABLES> 1,855
<ALLOWANCES> 0
<INVENTORY> 3,191
<CURRENT-ASSETS> 5,530
<PP&E> 9,303
<DEPRECIATION> 5,462
<TOTAL-ASSETS> 9,596
<CURRENT-LIABILITIES> 1,518
<BONDS> 1,350
0
0
<COMMON> 1
<OTHER-SE> 6,727
<TOTAL-LIABILITY-AND-EQUITY> 9,596
<SALES> 10,598
<TOTAL-REVENUES> 10,598
<CGS> 8,117
<TOTAL-COSTS> 8,117
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 79
<INCOME-PRETAX> 946
<INCOME-TAX> 322
<INCOME-CONTINUING> 624
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 624
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
