<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 March 31, 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 executive (Zip Code)
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 May 10, 1996.
Common Stock, $0.12 par value: 1,886,668 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
March 31 December 31
ASSETS 1996 1995
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 8,000 $ 10,000
Accounts receivable (less reserves of $125,000) 10,309,000 10,308,000
Inventories 13,595,000 12,111,000
Other current assets 30,000 29,000
----------- -----------
Total current assets 23,942,000 22,458,000
----------- -----------
DEFERRED INCOME TAX BENEFIT 694,000 694,000
NONCOMPETE AGREEMENT 1,671,000 1,818,000
OTHER ASSETS 950,000 981,000
PROPERTY, PLANT AND EQUIPMENT:
Land 36,000 36,000
Buildings and land improvements 1,397,000 1,397,000
Machinery and equipment 6,056,000 5,863,000
----------- -----------
7,489,000 7,296,000
Less accumulated depreciation (4,722,000) (4,571,000)
----------- -----------
Net property, plant and equipment 2,767,000 2,725,000
----------- -----------
TOTAL ASSETS $30,024,000 $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 March 31 December 31
STOCKHOLDERS' INVESTMENT 1996 1995
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long term debt $ 5,360,000 $ 5,362,000
Accounts payable - trade 7,420,000 5,503,000
Accrued Expenses:
Salaries, wages and other
compensation related benefits 795,000 786,000
Warranty 1,327,000 1,380,000
Product liability defense 1,670,000 1,560,000
Other 535,000 1,067,000
Deferred income taxes 250,000 156,000
Advances from customers 32,000 83,000
----------- -----------
Total current liabilities 17,389,000 15,897,000
LONG TERM DEBT 4,502,000 4,835,000
----------- -----------
Total liabilities 21,891,000 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 938,000 749,000
----------- -----------
Total stockholders' investment 8,133,000 7,944,000
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' INVESTMENT $30,024,000 $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)
For The Three Months Ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
NET SALES $13,477,000 $13,718,000
COST OF SALES 10,191,000 10,762,000
----------- -----------
Gross profit 3,286,000 2,956,000
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSE 2,773,000 2,745,000
----------- -----------
Income from operations 513,000 211,000
OTHER (EXPENSE) INCOME:
Interest expense (227,000) (212,000)
Other 19,000 27,000
----------- -----------
Income before income taxes 305,000 26,000
PROVISION FOR INCOME TAXES 116,000 10,000
----------- -----------
Net Income 189,000 16,000
Retained Earnings,
Beginning of period 749,000 1,009,000
----------- -----------
RETAINED EARNINGS, END OF PERIOD $ 938,000 $ 1,025,000
=========== ===========
NET INCOME PER SHARE $ 0.10 $ 0.01
=========== ===========
Weighted average number of common
shares outstanding 1,912,258 1,944,752
=========== ===========
</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 Three Months Ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 189,000 $ 16,000
Adjustments to reconcile net income to net cash provided
by (used for) operating activities:
Depreciation and amortization 334,000 358,000
Provision for deferred income taxes 94,000 10,000
Changes in assets and liabilities:
Increase in accounts receivable (1,000) (862,000)
(Increase) Decrease in inventories (1,484,000) 73,000
(Increase) Decrease in other current assets (1,000) 171,000
Net increase in accounts payable, accrued
expenses and advances from customers 1,395,000 601,000
------------ -----------
Net cash provided by operating activities 526,000 367,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (193,000) (146,000)
------------ -----------
Net cash (used for) investing activities (193,000) (146,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line-of-credit agreement (96,000) (269,000)
Noncompete liability principal payments (239,000) -
Exercise of stock options - 62,000
------------ -----------
Net cash provided by financing activities (335,000) (207,000)
------------ -----------
Net (decrease) increase in cash (2,000) 14,000
CASH AT BEGINNING OF YEAR 10,000 10,000
------------ -----------
CASH AT END OF QUARTER $ 8,000 $ 24,000
============ ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 355,000 $ 173,000
Income taxes paid 23,000 10,000
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
<PAGE> 7
REXWORKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 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 three month period ended March 31, 1996 is 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 March 31, 1996 and December 31, 1995 are as
follows:
<TABLE>
<CAPTION>
March 31 December 31
1996 1995
------------ ------------
<S> <C> <C>
At lower of cost (FIFO) or market:
Raw materials $ 303,000 $ 350,000
Work -in-process & components 8,032,000 6,780,000
Finished goods 7,710,000 7,431,000
------------- ------------
16,045,000 14,561,000
Excess of FIFO over LIFO cost (2,450,000) (2,450,000)
------------- ------------
Total inventories at LIFO $ 13,595,000 $ 12,111,000
============= ============
</TABLE>
(3) Debt
Debt as of March 31, 1996 and December 31, 1995 is as follows:
<TABLE>
<CAPTION>
March 31 December 31
1996 1995
---------- -----------
<S> <C> <C>
Borrowings under line-of-credit
agreement $ 8,712,000 $ 8,809,000
Liability for noncomplete payments to
be made to norkot's sole shareholder 1,150,000 1,388,000
Less: Current portion (5,360,000) (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 March 31, 1996 and December 31, 1995 is as follows:
<TABLE>
<CAPTION>
March 31 December 31
1996 1995
----------- ------------
<S> <C> <C>
Current Assets $23,942,000 $22,458,000
Current Liabilities 17,389,000 15,897,000
Working Capital 6,553,000 6,561,000
Current Ratio 1.4 1.4
</TABLE>
Inventories were higher at March 31, 1996 compared with December 31, 1995
because of differences in product mix between the Company's production plans
compared to actual market demand in the first three months of 1996. The
increase in inventory resulted in higher levels of accounts payable - trade at
March 31, 1996 compared to December 31, 1995.
At March 31, 1996 the Company had $1,288,000 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 First Quarter, 1996 Compared To The First Quarter, 1995
Net sales for the first quarter of 1996 decreased by $241,000 (1.8%) compared
to the first quarter of 1995. Higher sales in the Company's truck mounted
concrete mixer line and in the Maxigrind materials reduction line were offset
by lower sales of Trashmaster landfill compaction equipment.
Gross profit increased by $330,000 to $3,286,000 from the $2,956,000 reported
in the first quarter of 1995. Gross profit as a percentage of net sales
increased to 24.4% compared to 21.5% for the first quarter of 1995. Gross
profit improved despite the decrease in sales, because of a favorable mix of
sales during the quarter, and because of the continued impact of productivity
increases and cost reduction programs.
Selling, general and administrative expenses increased by $28,000 (1.0%) in the
first quarter of 1996 compared to the same period one year ago. Higher
expenses in sales and administration were partially offset by reduced spending
on product development and engineering.
Interest expense increased $15,000 (7.0%) during the three month period ended
March 31, 1996, compared to the same period in 1995 due to slightly higher
average borrowings
The provision for income tax expense increased from $10,000 in the first
quarter of 1995 to $116,000 in the first quarter of 1996. the increase is
directly related to the increase in income before taxes, which increased from
$26,000 in 1995 to $305,000 in 1996.
<PAGE> 11
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.
May 14, 1996 /s/ Thomas D. Lauerman
- ------------------------ ----------------------------------
Date Thomas D. Lauerman
Vice President
and Chief Financial Officer
May 14, 1996 /s/ Michael C. Hadjinian
- ------------------------ ----------------------------------
Date Michael C. Hadjinian
President, Chairman and
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 8,000
<SECURITIES> 0
<RECEIVABLES> 10,434,000
<ALLOWANCES> 125,000
<INVENTORY> 13,595,000
<CURRENT-ASSETS> 23,942,000
<PP&E> 7,489,000
<DEPRECIATION> 4,722,000
<TOTAL-ASSETS> 30,024,000
<CURRENT-LIABILITIES> 17,389,000
<BONDS> 4,502,000
0
0
<COMMON> 226,000
<OTHER-SE> 7,907,000
<TOTAL-LIABILITY-AND-EQUITY> 30,024,000
<SALES> 13,477,000
<TOTAL-REVENUES> 13,477,000
<CGS> 10,191,000
<TOTAL-COSTS> 10,191,000
<OTHER-EXPENSES> (19,000)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 227,000
<INCOME-PRETAX> 305,000
<INCOME-TAX> 116,000
<INCOME-CONTINUING> 189,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 189,000
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
