<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 March 31, 1997
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 April 18, 1997.
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,
1996 and 1995 and notes thereto, included in the Company's 1996 Form 10-K.
2
<PAGE> 3
REXWORKS INC.
REXWORKS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED
MARCH 31 DECEMBER 31
ASSETS 1997 1996
- ------ ------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 5,000 $ 5,000
Accounts receivable (less reserves of $125,000) 12,250,000 9,231,000
Inventories 8,534,000 8,832,000
Other current assets 433,000 460,000
------------- ------------
Total current assets 21,222,000 18,528,000
------------- ------------
DEFERRED INCOME TAX BENEFIT 969,000 969,000
NONCOMPETE AGREEMENT 1,081,000 1,228,000
OTHER ASSETS 888,000 918,000
PROPERTY, PLANT AND EQUIPMENT:
Land 36,000 36,000
Buildings and land improvements 1,445,000 1,445,000
Machinery and equipment 6,383,000 6,300,000
------------- ------------
7,864,000 7,781,000
Less accumulated depreciation (5,296,000) (5,141,000)
------------- ------------
Net property, plant and equipment 2,568,000 2,640,000
------------- ------------
TOTAL ASSETS $ 26,728,000 $ 24,283,000
============= ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
3
<PAGE> 4
REXWORKS INC.
REXWORKS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
<TABLE>
<CAPTION>
UNAUDITED
LIABILITIES AND MARCH 31 DECEMBER 31
STOCKHOLDERS' INVESTMENT 1997 1996
- ------------------------ ------------- -------------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long term debt $ 5,181,000 $ 4,088,000
Accounts payable - trade 6,142,000 4,453,000
Accrued Expenses:
Salaries and other benefits 737,000 964,000
Warranty 1,252,000 1,323,000
Product liability defense 1,533,000 1,657,000
Other 514,000 521,000
Deferred income taxes 298,000 253,000
Advances from customers 40,000 38,000
------------ ------------
Total current liabilities 15,697,000 13,297,000
LONG TERM DEBT 2,984,000 2,984,000
------------ ------------
Total liabilities 18,681,000 16,281,000
STOCKHOLDERS' INVESTMENT:
Common stock, $.12 par value,
4,300,000 shares authorized, 1,896,668
issued and outstanding 227,000 227,000
Additional paid-in capital 7,023,000 7,023,000
Treasury stock (26,000) (26,000)
Retained earnings 823,000 778,000
------------ ------------
Total stockholders' investment 8,047,000 8,002,000
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' INVESTMENT $ 26,728,000 $ 24,283,000
============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
4
<PAGE> 5
REXWORKS INC.
REXWORKS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ -------------
<S> <C> <C>
NET SALES $ 12,250,000 $ 13,477,000
COST OF SALES 9,855,000 10,432,000
------------ -------------
Gross profit 2,395,000 3,045,000
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSE 2,108,000 2,532,000
------------ -------------
Income from operations 287,000 513,000
OTHER (EXPENSE) INCOME:
Interest expense (173,000) (227,000)
Other (44,000) 19,000
------------ -------------
Income before income taxes 70,000 305,000
PROVISION FOR INCOME TAXES 25,000 116,000
------------ -------------
Net Income 45,000 189,000
Retained Earnings,
Beginning of period 778,000 749,000
------------ -------------
RETAINED EARNINGS, END OF PERIOD $ 823,000 $ 938,000
============ =============
NET INCOME PER SHARE $ 0.02 $ 0.10
============ =============
Weighted average number of common
shares outstanding 1,900,976 1,912,258
============ =============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements of operations.
5
<PAGE> 6
REXWORKS INC.
REXWORKS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 45,000 $ 189,000
Adjustments to reconcile net income to net cash
provided by (used for) operating
activities:
Depreciation and amortization 332,000 334,000
Provision for deferred income taxes 45,000 94,000
Changes in assets and liabilities:
Increase in accounts receivable (3,019,000) (1,000)
Decrease (increase) in inventories 298,000 (1,484,000)
Decrease (increase) in other current
assets 27,000 (1,000)
Net increase in other current liabilities 1,262,000 1,395,000
------------- ------------
Net cash provided by operating activities (1,010,000) 526,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (83,000) (193,000)
------------- ------------
Net cash (used for) investing activities (83,000) (193,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under line-of-credit
agreement 1,093,000 (96,000)
Noncompete liability principal payments - (239,000)
------------- ------------
Net cash provided by financing activities 1,093,000 (335,000)
------------- ------------
Net (decrease) increase in cash - (2,000)
CASH AT BEGINNING OF YEAR 10,000 10,000
------------- ------------
CASH AT END OF QUARTER $ 10,000 $ 8,000
============ =============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid $ 155,000 $ 355,000
Income taxes paid 11,000 23,000
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
6
<PAGE> 7
REXWORKS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
(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, 1997 are not necessarily indicative of
results to be expected for the entire 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, 1997 and December 31, 1996 are as follows:
<TABLE>
<CAPTION>
March 31 December 31
1997 1996
------------ ------------
<S> <C> <C>
At lower of cost (FIFO) or market:
Raw materials $ 120,000 $ 146,000
Work -in-process & components 5,603,000 6,550,000
Finished goods 5,500,000 4,825,000
------------ ------------
11,223,000 11,521,000
Excess of FIFO over LIFO cost (2,689,000) (2,689,000)
------------ ------------
Total inventories at LIFO $ 8,534,000 $ 8,832,000
============ ============
</TABLE>
(3) Debt
Debt as of March 31, 1997 and December 31, 1996 is as follows:
<TABLE>
<CAPTION>
March 31 December 31
1997 1996
------------- -------------
<S> <C> <C>
Borrowings under line-of-credit
agreement $ 8,165,000 $ 7,072,000
Less: Current portion (5,181,000) (4,088,000)
------------ -------------
Long term portion of debt $ 2,984,000 $ 2,984,000
============ =============
</TABLE>
7
<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 1996 Form 10-K, 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) Earnings per Share
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards Number 128, "Earnings per
Share," which is effective for periods ending after December 31, 1997.
This Statement revised the calculation of earnings per share. The
Company does not expect the impact of adoption to be material to the
financial statements.
8
<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, 1997 and December 31, 1996 is as follows:
<TABLE>
<CAPTION>
March 31 December 31
1997 1996
----------- -----------
<S> <C> <C>
Current Assets $21,222,000 $18,528,000
Current Liabilities 15,697,000 13,297,000
Working Capital 5,525,000 5,231,000
Current Ratio 1.4 1.4
</TABLE>
Receivables were higher at March 31, 1997 compared to December 31, 1996 because
of seasonal factors related to the Company's truck mixer business. The current
portion of bank borrowings increased to $5,181,000 at March 31, 1997 from
$4,088,000 at December 31, 1996. The increased borrowings were used to
partially fund the increase in receivables mentioned earlier. Accounts payable
- - trade increased from $4,453,000 to $6,142,000 during the first quarter of
1997. The increase was due to the timing of payments on certain vendor
accounts.
At March 31, 1997 the Company had $1,835,000 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.
9
<PAGE> 10
Rexworks Inc.
RESULTS OF OPERATIONS
---------------------
The First Quarter, 1997 Compared To The First Quarter, 1996
-----------------------------------------------------------
Net sales for the first quarter of 1997 decreased by $1,227,000 (9.1%) to
$12,250,000 from the $13,477,000 reported in the first quarter of 1996. Sales
were lower in the Company's concrete mixer and landfill compaction lines; lower
sales in those product lines were partially offset by higher sales in the
Company's grinder product line.
Gross profit declined by $650,000 (21.3%) to $2,395,000 from the $3,045,000
reported in the first quarter of 1996. Gross profit as a percentage of net
sales declined to 19.6% compared to 22.6% in the first quarter of 1996. Gross
profit declined as a percentage of sales because of unfavorable product mix
within the Company's concrete mixer and service parts businesses, higher
warranty costs, and increased manufacturing variances due to lower levels of
production.
Selling, general and administrative expenses declined by $424,000 (16.7%) to
$2,108,000 compared to $2,532,000 during the same period one year ago.
Spending declined in virtually all categories as the Company implemented
programs to control spending and reduce costs in response to lower sales
volume.
Interest expense declined by $54,000 (23.8%) to $173,000 during the first
quarter of 1997 compared to $227,000 during the same period one year ago. The
reduction was due to lower levels of average indebtedness during 1997 compared
to 1996.
Other income and expense changed from $19,000 of income in the first quarter of
1996 to $44,000 of expense during the first quarter of 1997. The change
reflects higher expenses associated with a dealer promotional program to
subsidize interest costs for dealer equipment inventories.
The provision for income tax expense was recorded at effective rates of 36% and
38% in 1997 and 1996, respectively. Changes in tax expense was largely the
result of changes in the level of pre-tax income.
FORWARD LOOKING STATEMENTS
--------------------------
The forward-looking statements, or statements based on the Company's belief,
expectation, or opinion in this report are subject to many uncertainties. The
Company's actual results may differ materially from those described in the
forward-looking or other statements. Factors which could cause such a variance
to occur include, but are not limited to, changes in general economic
conditions in the geographical areas and market segments that the Company is
targeting for its products, access to sufficient debt or equity capital to meet
the Company's operating and financial needs, the inherent uncertainty of
litigation involving the Company's products, and the quality of price of
similar or comparable products offered by the Company's competitors.
10
<PAGE> 11
Rexworks Inc.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Description
------- -----------
1
3.1 Restated Certificate of Incorporation.
1
3.2 By-laws of Company, as amended.
_____________________________
1 Incorporated herein by reference to the Company's
Registration Statement on Form S-18, Registration
Number 33-12488 effective April 21, 1987.
(b) Reports on Form 8-K
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.
April 23, 1997 /s/ Thomas D. Lauerman
------------------------- -----------------------------
Date Thomas D. Lauerman
Vice President
and Chief Financial Officer
April 23, 1997 /s/ Laurance R. Newman
------------------------- -----------------------------
Date Laurance R. Newman
President and Chief
Executive Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,000
<SECURITIES> 0
<RECEIVABLES> 12,375,000
<ALLOWANCES> 125,000
<INVENTORY> 8,534,000
<CURRENT-ASSETS> 21,222,000
<PP&E> 7,864,000
<DEPRECIATION> 5,296,000
<TOTAL-ASSETS> 26,728,000
<CURRENT-LIABILITIES> 15,697,000
<BONDS> 2,984,000
0
0
<COMMON> 227,000
<OTHER-SE> 7,820,000
<TOTAL-LIABILITY-AND-EQUITY> 26,728,000
<SALES> 12,250,000
<TOTAL-REVENUES> 12,250,000
<CGS> 9,855,000
<TOTAL-COSTS> 9,855,000
<OTHER-EXPENSES> 44,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 70,000
<INCOME-TAX> 25,000
<INCOME-CONTINUING> 45,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 45,000
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
