<PAGE> 1
REXWORKS INC.
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, 1996
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 Identification No.)
incorporation or organization)
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 (Zip Code)
executive office)
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 9, 1996.
Common Stock, $0.12 par value: 1,896,668 shares
<PAGE> 2
REXWORKS INC.
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,
1995 and 1994 and notes thereto, included in the Company's 1995 Form 10K.
<PAGE> 3
REXWORKS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED
JUNE 30 DECEMBER 31
ASSETS 1996 1995
------------ -----------
CURRENT ASSETS:
<S> <C> <C>
Cash $ 14,000 $ 10,000
Accounts receivable (less reserves
of $133,000 and $125,000, respectively) 10,314,000 10,308,000
Inventories 10,986,000 12,111,000
Other current assets 65,000 29,000
---------- ----------
Total current assets 21,379,000 22,458,000
---------- ----------
DEFERRED INCOME TAX BENEFIT 694,000 694,000
NONCOMPETE AGREEMENT 1,523,000 1,818,000
OTHER ASSETS 920,000 981,000
PROPERTY, PLANT AND EQUIPMENT:
Land 36,000 36,000
Buildings and land improvements 1,397,000 1,397,000
Machinery and equipment 6,090,000 5,863,000
---------- ----------
7,523,000 7,296,000
Less accumulated depreciation (4,877,000) (4,571,000)
Net property, plant and equipment 2,646,000 2,725,000
---------- ----------
TOTAL ASSETS $27,162,000 $28,676,000
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
<PAGE> 4
REXWORKS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
UNAUDITED
LIABILITIES AND JUNE 30 DECEMBER 31
STOCKHOLDERS' INVESTMENT 1996 1995
---------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long term debt $5,266,000 $5,362,000
Accounts payable - trade 4,508,000 5,503,000
Accrued Expenses:
Salaries, wages and other
compensation related benefits 736,000 786,000
Warranty 1,397,000 1,380,000
Product liability defense 1,611,000 1,560,000
Other 542,000 1,067,000
Deferred income taxes 274,000 156,000
Advances from customers 62,000 83,000
----------- -----------
Total current liabilities 14,396,000 15,897,000
LONG TERM DEBT 4,502,000 4,835,000
----------- -----------
Total liabilities 18,898,000 20,732,000
STOCKHOLDERS' INVESTMENT:
Common stock, $.12 par value,
4,300,000 shares authorized, 1,886,668
issued and outstanding 226,000 226,000
Additional paid-in capital 6,995,000 6,995,000
Treasury stock (26,000) (26,000)
Retained earnings 1,069,000 749,000
----------- -----------
Total stockholders' investment 8,264,000 7,944,000
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' INVESTMENT $27,162,000 $28,676,000
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
<PAGE> 5
REXWORKS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------- ------------------------------
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET SALES $14,304,000 $13,679,000 $27,781,000 $27,398,000
COST OF SALES 11,230,000 11,267,000 21,421,000 22,029,000
---------- ---------- ---------- ----------
Gross profit 3,074,000 2,412,000 6,360,000 5,369,000
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSE 2,657,000 2,733,000 5,430,000 5,477,000
---------- ---------- ---------- ----------
Income from operations 417,000 (321,000) 930,000 (108,000)
OTHER (EXPENSE) INCOME:
Interest expense (231,000) (234,000) (458,000) (446,000)
Other 22,000 (96,000) 41,000 (69,000)
---------- ---------- ---------- ----------
Income before income taxes 208,000 (651,000) 513,000 (623,000)
PROVISION FOR INCOME TAXES 77,000 (248,000) 193,000 (236,000)
---------- ---------- ---------- ----------
Net Income 131,000 (403,000) 320,000 (387,000)
Retained Earnings,
beginning of period 938,000 1,025,000 749,000 1,009,000
---------- ---------- ---------- ----------
RETAINED EARNINGS, END OF PERIOD $ 1,069,000 $ 622,000 $ 1,069,000 $ 622,000
========== ========== ========== ==========
NET INCOME PER SHARE $ $0.07 $ (0.21) $ 0.17 $ (0.20)
========== ========== ========== ==========
Weighted average number of common
shares outstanding 1,911,052 1,945,845 1,911,459 1,945,298
========== ========== ========== ==========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements of operations.
<PAGE> 6
REXWORKS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Six Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 320,000 $ (387,000)
Adjustments to reconcile net income to net cash provided
by (used for) operating activities:
Depreciation and amortization 667,000 691,000
Gain on sale of equipment (1,000)
Provision (credit) for deferred income taxes 118,000 (207,000)
Changes in assets and liabilities:
Sale of accounts receivable 455,000 2,211,000
(Increase) in accounts receivable (461,000) (2,093,000)
Decrease (increase) in inventories 1,125,000 (2,023,000)
(Increase) decrease in other current assets (36,000) 187,000
Net (decrease) increase in accounts payable, accrued
expenses and advances from customers (1,528,000) 1,214,000
----------- -----------
Net cash provided by (used for) operating activities 660,000 (408,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (227,000) (285,000)
Proceeds from the sale of equipment 1,000
----------- -----------
Net cash used for investing activities (227,000) (284,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (repayment) borrowings under line-of-credit agreement (190,000) 630,000
Noncompete liability principal payments (239,000) --
Exercise of stock options -- 62,000
----------- -----------
Net cash (used for) provided by financing activities (429,000) 692,000
----------- -----------
Net increase in cash 4,000 --
CASH AT BEGINNING OF YEAR 10,000 10,000
----------- -----------
CASH AT END OF PERIOD $ 14,000 $ 10,000
=========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 572,000 $ 376,000
Income taxes paid 77,000 44,000
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE> 7
REXWORKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996 and 1995
(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 six
month period ended June 30, 1996 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, 1996 and December 31, 1995 are as follows:
<TABLE>
<CAPTION>
June 30 December 31
1996 1995
--------- -----------
<S> <C> <C>
At lower of cost (FIFO) or market:
Raw materials $ 262,000 $ 350,000
Work -in-process & components 7,669,000 6,780,000
Finished goods 5,505,000 7,431,000
----------- -----------
13,436,000 14,561,000
Excess of FIFO over LIFO cost (2,450,000) (2,450,000)
----------- -----------
Total inventories at LIFO $10,986,000 $12,111,000
=========== ===========
</TABLE>
(3) Debt
Debt as of June 30, 1996 and December 31, 1995 is as follows:
<TABLE>
<CAPTION>
June 30 December 31
1996 1995
--------- -----------
<S> <C> <C>
Borrowings under line-of-credit
agreement $ 8,618,000 $ 8,809,000
Liability for non-compete payments to
be made to Norkot's sole shareholder 1,150,000 1,388,000
Less: Current portion (5,266,000) (5,362,000)
----------- ----------
Long term portion of debt $ 4,502,000 $ 4,835,000
=========== ===========
</TABLE>
<PAGE> 8
REXWORKS INC.
(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 1995 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.
<PAGE> 9
REXWORKS INC.
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, 1996 and December 31, 1995 is as follows:
<TABLE>
<CAPTION>
June 30 December 31
1996 1995
------- -----------
<S> <C> <C>
Current Assets $21,379,000 $22,458,000
Current Liabilities 14,396,000 15,897,000
Working Capital 6,983,000 6,561,000
Current Ratio 1.5 1.4
</TABLE>
Inventories balances fell in the second quarter of the year, after rising in
the first quarter, as the Company implemented programs to reduce finished goods
inventories and better balance production plans with actual sales. Inventory
at June 30, 1996 was $1,125,000 lower than at December 31, 1995. The decrease
in inventory caused accounts payable - trade to fall by $995,000 between
December 31, 1995 and June 30,1996.
At June 30, 1996 the Company had $1,382,000 of borrowings available under
its line-of-credit facility. In management's opinion, anticipated future cash
generated from 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.
<PAGE> 10
REXWORKS INC.
RESULTS OF OPERATIONS
The Second Quarter, 1996 Compared To The Second Quarter, 1995
Net sales for the second quarter of 1996 increased by $625,000 (4.6%) compared
to the second quarter of 1995. Higher sales in the Maxigrind materials
reduction line were partially offset by lower sales of cement mixers and
Trashmaster landfill compaction equipment.
Gross profit increased by $662,000 to $3,074,000 from the $2,412,000 reported
in the second quarter of 1995. Gross profit as a percentage of net sales
increased to 21.5% compared to 17.6% for the second quarter of 1995. The
increase in gross profit percentage reflects both the continued impact of
productivity improvements and cost reduction programs, and a shift in sales mix
between the two periods from lower margin cement mixers to higher margin
grinders.
Selling, general and administrative expenses decreased by $76,000 (2.8%) in the
second quarter of 1996 compared to the same period one year ago. Lower
administrative, engineering, and product development costs were partially
offset by higher spending on sales and marketing activities.
Other income and expense changed to income of $22,000 in the second quarter of
1996 from an expense of $96,000 in the second quarter of 1995, or an increase
in pre-tax income of $118,000. Included in this category in both 1996 and 1995
were losses on the sale of certain factored receivables. Those losses totalled
$14,000 on receivables sales of $455,000 in 1996, compared to losses of
$113,000 on sales of $2,211,000 in the same period one year ago.
The provision for income tax expense changed to an expense of $77,000 in the
second quarter of 1996 from a benefit of $248,000 in the second quarter of
1995. The total change of $325,000 (an increase in income) is directly related
to the change in pre-tax profit or loss to a profit of $131,000 in the second
quarter of 1996 from a loss of $403,000 in the same period one year ago.
The Six Months Ended June 30, 1996 Compared to the Six Months Ended June 30,
1995
Net sales in the first half of 1996 increased by $383,000 (1.4%) compared to
the first half of 1995, as higher sales in the Company's Maxigrind materials
reduction line, cement mixers, and service parts were more than able to
compensate for sales weakness in the Company's Trashmaster landfill compaction
line.
Gross profit increased by $991,000 for the six months ended June 30, 1996
compared to the same period in 1995. Gross profit as a percentage of sales
increased to 22.9% for the first six months of 1996 compared to 19.6% for the
same period in 1995. Most of the improvement in margins resulted from the
continued impact of cost reduction and productivity improvement programs; a
shift in sales volume to higher margin products and customers from lower margin
products and customers also contributed to the improvement.
<PAGE> 11
REXWORKS INC.
Selling, general and administrative expenses declined by $47,000 (0.8%) in the
first half of 1996 compared to the same period last year. Lower spending in
engineering and product development were partially offset by higher spending in
the sales and marketing functions.
Interest expense increased by $12,000 (2.7%) during the first half of 1996
compared to the same period in 1995. The increase reflects the impact of
slightly higher average borrowing levels.
Other income and expense changed to income of $41,000 in the first half of 1996
from an expense of $69,000 during the same period in 1995, or an increase in
pre-tax profit of $110,000. Most of the change in this category is due to
changes in the loss on sales of certain factored receivables. In 1996 these
losses totalled $14,000 on receivable sales of $455,000, compared to losses of
$113,000 on receivables sales of $2,211,000 during the same period in 1995.
The provision for income tax expense changed to an expense of $193,000 in the
first half of 1996 from a benefit of $236,000 during the same period last year.
The total change of $429,000 (an increase in income) is directly related to
the increase in pre-tax profit or loss to a profit of $320,000 in 1996 from a
loss of $387,000 in 1995.
PART II OTHER INFORMATION
NONE
<PAGE> 12
REXWORKS INC.
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 12, 1996 /s/ Thomas D. Lauerman
- ------------------ -------------------------------
Date Thomas D. Lauerman
Vice President
and Chief Financial Officer
August 12, 1996 /s/ Michael C. Hadjinian
- ------------------ -------------------------------
Date Michael C. Hadjinian
President, Chairman and
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 14,000
<SECURITIES> 0
<RECEIVABLES> 10,447,000
<ALLOWANCES> 133,000
<INVENTORY> 10,986,000
<CURRENT-ASSETS> 21,379,000
<PP&E> 7,523,000
<DEPRECIATION> 4,877,000
<TOTAL-ASSETS> 27,162,000
<CURRENT-LIABILITIES> 14,396,000
<BONDS> 4,502,000
0
0
<COMMON> 226,000
<OTHER-SE> 8,038,000
<TOTAL-LIABILITY-AND-EQUITY> 27,162,000
<SALES> 14,304,000
<TOTAL-REVENUES> 14,304,000
<CGS> 11,230,000
<TOTAL-COSTS> 11,230,000
<OTHER-EXPENSES> (22,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 231,000
<INCOME-PRETAX> 208,000
<INCOME-TAX> 77,000
<INCOME-CONTINUING> 131,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 131,000
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
