<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-15836
REXWORKS INC.
--------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 39-1406918
--------------------------------------- ---------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
445 West Oklahoma Avenue
Milwaukee, WI 53207
--------------------------------------- ---------------------
(Address of principal executive office) (Zip Code)
P.O. Box 2037
Milwaukee, WI 53201
--------------------------------------- ---------------------
(Mailing address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 414-747-7200
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 ISSUERS)
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 11, 1995.
Common Stock, $0.12 par value: 1,884,332 shares
<PAGE> 2
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements.
The condensed financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. It is suggested that these interim financial statements be read
in conjunction with the financial statements for the years ended December 31,
1994 and 1993 and notes thereto, included in the Company's 1994 Form 10K.
<PAGE> 3
REXWORKS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED
June 30 December 31
ASSETS 1995 1994
----------------------------------------------- --------------- ---------------
<S> <C> <C>
CURRENT ASSETS:
Cash $10,000 $10,000
Accounts receivable 7,634,000 7,752,000
Inventories 12,069,000 10,046,000
Other current assets 80,000 267,000
--------------- ---------------
Total current assets 19,793,000 18,075,000
--------------- ---------------
DEFERRED INCOME TAX BENEFIT 535,000 535,000
NONCOMPETE AGREEMENT 2,260,000 2,407,000
OTHER ASSETS 895,000 1,104,000
PROPERTY, PLANT AND EQUIPMENT:
Land 36,000 36,000
Buildings and land improvements 1,282,000 1,282,000
Machinery and equipment 5,761,000 5,481,000
--------------- ---------------
7,079,000 6,799,000
Less accumulated depreciation (4,334,000) (4,004,000)
--------------- ---------------
Net property, plant and equipment 2,745,000 2,795,000
--------------- ---------------
TOTAL ASSETS $26,228,000 $24,916,000
=============== ===============
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part of these statements
<PAGE> 4
REXWORKS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED
LIABILITIES AND June 30 December 31
STOCKHOLDERS' INVESTMENT 1995 1994
----------------------------------------------- --------------- ---------------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $3,849,000 $2,980,000
Accounts payable--trade 5,338,000 4,599,000
Accrued expenses:
Salaries, wages and other
compensation related benefits 1,100,000 980,000
Warranty claims 1,446,000 1,296,000
Product liability defense 1,665,000 1,550,000
Other 459,000 305,000
Deferred income taxes 0 207,000
Advances from customers 40,000 104,000
------------ ------------
Total current liabilities 13,897,000 12,021,000
------------ ------------
LONG-TERM DEBT 4,514,000 4,753,000
------------ ------------
Total liabilities 18,411,000 16,774,000
------------ ------------
STOCKHOLDERS' INVESTMENT:
Common stock, $.12 par value, 4,300,000
shares authorized, 1,886,668 and 1,858,021
shares issued and outstanding, respectively 226,000 223,000
Additional paid-in capital 6,995,000 6,936,000
Treasury stock (26,000) (26,000)
Retained earnings 622,000 1,009,000
------------ ------------
Total stockholders' investment 7,817,000 8,142,000
------------ ------------
TOTAL LIABILITIES AND STOCK-
HOLDERS' INVESTMENT $26,228,000 $24,916,000
============ ============
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part of these statements.
<PAGE> 5
REXWORKS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
Three months Three months Six months Six months
ended ended ended ended
June 30, 1995 June 30, 1994 June 30, 1995 June 30, 1994
--------------------------------- -------------------------------
<S> <C> <C> <C> <C>
Net sales $13,679,000 $13,612,000 $27,398,000 $26,079,000
Cost of sales 11,267,000 10,773,000 22,029,000 20,621,000
------------ ------------ ------------ ------------
GROSS PROFIT 2,412,000 2,839,000 5,369,000 5,458,000
Selling, general and
administrative expenses 2,733,000 2,322,000 5,477,000 4,431,000
------------ ------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS (321,000) 517,000 (108,000) 1,027,000
Interest expense (234,000) (173,000) (446,000) (338,000)
Other income (expense) (96,000) 58,000 (69,000) 96,000
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE PROVISION
(CREDIT) FOR INCOME TAXES (651,000) 402,000 (623,000) 785,000
Provision (credit) for income taxes (248,000) 166,000 (236,000) 323,000
------------ ------------ ------------ ------------
NET INCOME (LOSS) (403,000) 236,000 (387,000) 462,000
Retained earnings,
beginning of period 1,025,000 74,000 1,009,000 (152,000)
------------ ------------ ------------ ------------
RETAINED EARNINGS, END OF PERIOD $622,000 $310,000 $622,000 $310,000
============ ============ ============ ============
NET INCOME (LOSS) PER SHARE: ($0.21) $0.12 ($0.20) $0.23
============ ============ ============ ============
Weighted average number of common
shares outstanding 1,945,845 1,982,210 1,945,298 1,975,626
============ ============ ============ ============
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part of these statements.
<PAGE> 6
REXWORKS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Six months Six months
ended ended
June 30, 1995 June 30, 1994
----------------------------------------------- --------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($387,000) $ 462,000
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 691,000 622,000
Gain on sale of equipment (1,000) (22,000)
Provision (credit) for deferred income taxes (207,000) 273,000
Changes in assets and liabilities:
Sale of accounts receivable 2,211,000 0
(Increase) in accounts receivable (2,093,000) (2,971,000)
(Increase) in inventories (2,023,000) (1,718,000)
Decrease in other current assets 187,000 170,000
Net increase in accounts payable, accrued
expenses and advances from customers 1,214,000 2,041,000
------------ -----------
Net cash (used for) operating activities (408,000) (1,143,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (285,000) (301,000)
Proceeds from the sale of equipment 1,000 22,000
------------ -----------
Net cash (used for) investing activities (284,000) (279,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line-of-credit
agreement 630,000 1,531,000
Noncompete liability principal payments 0 (139,000)
Exercise of stock options 62,000 30,000
------------ -----------
Net cash provided by financing activities 692,000 1,422,000
------------ -----------
Net increase in cash 0 0
CASH AT BEGINNING OF YEAR 10,000 10,000
------------ -----------
CASH AT END OF QUARTER $ 10,000 $ 10,000
------------ -----------
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 376,000 $ 355,000
Income taxes paid 44,000 50,000
</TABLE>
The accompanying notes to consolidated financial
statements are an integral part of these statements.
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and 1994
(1) In the opinion of management, all adjustments (consisting of
only normal recurring adjustments) which were necessary to a fair
statement of the results of the interim periods have been included in
the preceding financial statements. However, the results of
operations for the three and six month periods ended June 30, 1995 are
not necessarily indicative of results to be expected for the year.
Certain items, including income taxes, LIFO charges and various other
accruals are included in these statements based on current estimates
for the entire year.
(2) Inventories
Substantially all inventories are stated at cost which does not exceed
market, determined on the last-in, first-out (LIFO) basis.
Inventory amounts as of June 30, 1995 and December 31, 1994 are as
follows:
<TABLE>
<CAPTION>
June 30 December 31
1995 1994
------------- ------------
<S> <C> <C>
At lower of cost (FIFO) or market:
Raw materials $ 263,000 $ 335,000
Work-in-process & components 7,167,000 6,035,000
Finished goods 6,630,000 5,649,000
------------- -------------
14,060,000 12,019,000
Excess of FIFO over LIFO cost (1,991,000) (1,973,000)
------------- -------------
Total inventories at LIFO $12,069,000 $10,046,000
============= =============
</TABLE>
(3) Debt
Debt as of June 30, 1995 and December 31, 1994 is as follows:
<TABLE>
<CAPTION>
June 30 December 31
1995 1994
------------ -----------
<S> <C> <C>
Borrowings under line-of-credit $6,975,000 $6,345,000
agreement
Liability for noncomplete payments to
be made to Norkot's sole shareholder 1,388,000 1,388,000
Less: Current portion (3,849,000) (2,980,000)
----------- -----------
Long term portion of debt $4,514,000 $4,753,000
=========== ===========
</TABLE>
<PAGE> 8
(4) Legal Proceedings
Product liability claims against the Company arise from time to time
in the ordinary course of business. As explained more fully in the
Company's 1994 Form 10K, Rexworks is self-insured against product
liability claims, because, in the opinion of management, the premiums
the Company would pay for insurance are cost prohibitive and not
justified by the Company's historical loss experience. The Company is
currently party to a number of legal proceedings involving product
liability claims in a number of states, some of which involve
significant claims. These proceedings are now pending before courts
in various stages or are in discovery stages. In most instances,
pending claims allege the Company produced faulty product which led to
injury. The Company generally denies liability and intends to
vigorously defend these proceedings, but considers settlements where
appropriate.
There is an inherent uncertainty as to the eventual resolution of
unsettled claims. However, in the opinion of management, based in part
on advice from its outside legal counsel, any costs, losses and
settlements with respect to existing claims in excess of
established reserves will not have a material impact on the Company's
operating income.
(5) Sale of Receivables
In the second quarter of 1995, the Company entered into an agreement
with its bank to sell up to $6.0 million of receivables due in January
1996 to the bank with full recourse at a discount rate of prime plus
1.25%. As of June 30, 1995 the Company sold $2,211,000 of receivables
to the bank. The Company recorded a $113,000 loss on the sale of
receivables which is included in Other Income (Expense) in the second
quarter of 1995.
<PAGE> 9
Item 2. Management's Discussion and Analysis of Financial Conditions and
Results of Operations.
The following comments are provided to assist in the understanding of the
Company's operations as set forth in the consolidated financial statements.
ANALYSIS OF FINANCIAL CONDITION
Liquidity and Capitalization
Working capital and current ratio are financial measurements that provide an
indication of the Company's ability to meet its short-term obligations. This
data at June 30, 1995 and December 31, 1994 is as follows:
<TABLE>
<CAPTION>
June 30 December 31
1995 1994
----------- -----------
<S> <C> <C>
Current Assets $19,793,000 $18,075,000
Current Liabilities 13,897,000 12,021,000
Working Capital 5,896,000 6,054,000
Current Ratio 1.4 1.5
</TABLE>
Inventories were higher at June 30, 1995 compared with December 31, 1994 due to
differences in product mix between the Company's production plans compared to
actual market demand in the first six months of 1995. The increase in
inventory resulted in increased borrowings on the Company's line-of-credit
facility at June 30, 1995 compared to December 31, 1994.
At June 30, 1995 the Company had $3,025,000 of borrowings available under its
line-of-credit facility. In management's opinion, anticipated future cash
generated form operations and the existing credit facility will be sufficient
to meet the Company's short and long term needs for working capital and
required capital additions.
RESULTS OF OPERATIONS
The Second Quarter, 1995 Compared To The Second Quarter, 1994
Net sales for the second quarter of 1995 increased $67,000 (0.5%) compared to
the second quarter of 1994. Sales of the Company's truck mounted concrete
mixer product line increased significantly compared to the second quarter of
1994 due to continued strong market demand. Sales of the Company's Trashmaster
landfill compactor product line were also higher, particularly sales of the
Company's largest model, the 3-90C. Sales of the Company's Maxigrind materials
reduction product line
<PAGE> 10
were down significantly in the second quarter of 1995 compared to the second
quarter of 1994 due to weak market demand.
Management anticipates soft market demand for its higher margin Maxigrind
products during the remainder of 1995 and continued strong demand for its truck
mounted concrete mixers and Trashmaster landfill compactors.
Gross profit decreased $427,000 to $2,412,000 in the second quarter of 1995
from the $2,839,000 reported in the second quarter of 1994. Gross profit as a
percentage of net sales decreased to 17.6% compared to 20.9% for the second
quarter of 1994. During the second quarter of 1995, a greater percentage of
the Company's sales were in the Company's lower margin products compared to the
second quarter of 1994.
Selling, general and administrative expenses increased $411,000 (17.7%) to
$2,733,000 for the three months ended June 30, 1995 compared to the same period
in 1994 due primarily to additional marketing, new product introduction and
engineering expenses. In addition, the Company incurred higher warranty,
customer service and product support expenses. Management has initiated
actions to reduce overhead and expense levels for the remainder of 1995.
Interest expense increased $61,000 (35.3%) during the three month period ended
June 30, 1995, compared to the same period in 1994 due to higher average
borrowings and interest rate increases.
In addition, in the second quarter of 1995, the Company factored $2,211,000 of
accounts receivable payable in January 1996. The Company recorded a $113,000
loss on the factoring transaction which is included in Other Income (Expense)
in the second quarter of 1995.
Six Months Ended June 30, 1995 Compared to Six Months Ended June 30, 1994
Net sales in the first half of 1995 increased $1,319,000 (5.1%) compared to the
first half of 1994 due primarily to continued strong market demand for the
Company's Trashmaster landfill compactor product line, particularly the
Company's largest model, the 3-90C as well as continued strong market demand
for the Company's truck mounted concrete mixer product line. Sales of the
Company's Maxigrind materials reduction products were lower in the first half
of 1995 compared to the first half of 1994 due to weak market demand.
Gross profit decreased $89,000 for the six months ended June 30, 1995 compared
to the same period in 1994. Gross profit as a percentage of net sales
decreased to 19.6% for the first six months of 1995 compared to 20.9% for the
same period in 1994. During the first six months of 1995, a greater percentage
of the Company's sales were in the Company's lower margin products compared to
the first six months of 1994. This change in sales mix was partially offset by
improvements in manufacturing productivity and manufacturing overhead expense
reductions.
Selling, general and administrative expenses increased $1,046,000 (23.6%) to
$5,477,000 for the six months ended June 30, 1995 compared to the same period
in
<PAGE> 11
1994 due to new product development and market introduction costs. In
addition, the Company incurred higher warranty, customer service and product
support expenses.
Interest expense increased $108,000 (32.0%) during the first six months of 1995
compared to the same period in 1994 due to higher average borrowings and
interest rate increases.
The results for the first six months of 1995 also include a charge to earnings
of $113,000 for loss on factoring of receivables, which is included in Other
Income (Expense).
<PAGE> 12
PART II OTHER INFORMATION
NONE
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.
REXWORKS INC.
August 14, 1995 /s/ Thomas D. Lauerman
------------------------------------ ------------------------------
Date Thomas D. Lauerman
Vice President
and Chief Financial Officer
August 14, 1995 /s/ Michael C. Hadjinian
------------------------------------ ------------------------------
Date Michael C. Hadjinian
President, Chairman and
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-01-1995
<CASH> 10
<SECURITIES> 0
<RECEIVABLES> 7,634
<ALLOWANCES> 0
<INVENTORY> 12,069
<CURRENT-ASSETS> 19,793
<PP&E> 7,079
<DEPRECIATION> 4,334
<TOTAL-ASSETS> 26,228
<CURRENT-LIABILITIES> 13,897
<BONDS> 4,514
<COMMON> 226
0
0
<OTHER-SE> 7,591
<TOTAL-LIABILITY-AND-EQUITY> 26,228
<SALES> 13,679
<TOTAL-REVENUES> 13,679
<CGS> 11,267
<TOTAL-COSTS> 11,267
<OTHER-EXPENSES> 2,733
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 234
<INCOME-PRETAX> (651)
<INCOME-TAX> (248)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (403)
<EPS-PRIMARY> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
