<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, 1996
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
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Commission File No. 0-1412
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M. H. Rhodes, Inc
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(Exact name of registrant as specified in its charter)
Delaware 06-0509270
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(State or other jurisdiction of (I.R.S. Employer
incorporation) Identification No.)
99 Thompson Road, Avon, Connecticut 06001
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (203) 673-3281
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- --------------------------------------------------------------------------------
Former name, address and 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
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There were, as of March 31, 1996, 202,599 shares of Common Stock outstanding.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
M.H. RHODES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31 MARCH 31
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ASSETS
1995 1996
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<S> <C> <C>
CURRENT ASSETS:
Cash $ 32,502 $ 28,771
Accounts Receivable 1,252,210 1,162,287
Inventories 3,150,262 2,850,278
Prepaid Expenses and Other 35,622 68,058
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TOTAL CURRENT ASSETS 4,470,596 4,109,394
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PROPERTY, PLANT AND EQUIPMENT, AT COST:
Buildings and Improvements 1,270,698 1,270,698
Machinery and Equipment 2,518,231 2,533,646
Land 65,000 65,000
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Sub-total 3,853,929 3,869,344
Less:Accumulated Depreciation (3,009,622) (3,055,349)
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NET PROPERTY, PLANT AND EQUIPMENT 844,307 813,995
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OTHER ASSETS 32,054 24,163
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TOTAL ASSETS $ 5,346,957 $ 4,947,552
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes Payable $ 598,979 $ 494,004
Current Portion of Long Term Debt 947,331 903,570
Accounts Payable 513,432 410,580
Other Accrued Expenses 324,909 282,126
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TOTAL CURRENT LIABILITIES 2,384,651 2,090,280
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LONG-TERM DEBT, LESS CURRENT PORTION 275,621 265,420
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OTHER NON-CURRENT LIABILITIES 121,757 106,569
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SHAREHOLDERS' EQUITY:
Common Stock, $1.00 par value,
400,000 shares authorized 300,880 300,880
Paid in Capital 3,697 3,697
Retained Earnings 4,158,862 4,036,719
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Sub-Total 4,463,439 4,341,296
Less: Treasury Stock (1,048,431) (1,048,431)
Deferred Compensation (850,080) (807,582)
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NET SHAREHOLDERS' EQUITY $ 2,564,928 $ 2,485,283
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TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 5,346,957 $ 4,947,552
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</TABLE>
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<PAGE> 3
M. H. RHODES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
THREE MONTH PERIOD
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ENDED MARCH 31
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1995 1996
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<S> <C> <C>
NET SALES $ 2,337,992 $ 1,989,130
COST OF GOODS SOLD 1,824,313 1,670,669
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GROSS PROFIT 513,679 318,461
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 451,446 416,362
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OPERATING INCOME(LOSS) 62,233 (97,901)
INTEREST EXPENSE (41,910) (33,021)
OTHER INCOME(EXPENSE) 417 (8,229)
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INCOME BEFORE INCOME TAX 20,740 (139,151)
PROVISION (BENEFIT) FOR INCOME TAX 4,000 (16,452)
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NET INCOME(LOSS) 16,740 (122,699)
TRANSLATION ADJUSTMENT 714 556
BEGINNING RETAINED EARNINGS 5,046,455 4,158,862
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ENDING RETAINED EARNINGS $ 5,063,909 $ 4,036,719
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AVERAGE SHARES OUTSTANDING 208,130 202,599
EARNINGS PER SHARE $ .08 $ (.61)
CASH DIVIDENDS PER SHARE $ - $ -
</TABLE>
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<PAGE> 4
M. H. RHODES, INC AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTH PERIOD
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ENDED MARCH 31
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CASH FLOWS FROM OPERATING ACTIVITIES: 1995 1996
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<S> <C> <C>
Net Income $ 16,740 $ (122,699)
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Adjustments to reconcile net income
to net cash provided by operating
activities:
(Gain) on sale of Fixed Assets - (1,000)
Depreciation 69,051 45,042
Amortization of deferred compensation 42,498 42,498
Translation adjustments 714 556
Amortization of other assets 5,754 7,891
Change in assets and liabilities:
(Increase)Decrease in accounts
receivable (31,484) 89,923
Decrease in inventories 178,842 299,984
Increase in prepaid expenses and other (13,298) (32,436)
Decrease in accounts payable (299,239) (102,852)
Increase(Decrease) in accrued expenses 75,387 (43,927)
Decrease in other noncurrent
liabilities (773) (15,188)
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Total adjustments 27,452 290,491
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Net cash provided by operating
activities 44,192 167,792
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,440) (13,585)
Proceeds from sale of property & equipment - 1,000
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Net cash used in investing activities (3,440) (12,585)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt (2,224,090) (1,972,682)
Proceeds from additional borrowings 2,177,177 1,813,744
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Net cash used in financing activities (46,913) (158,938)
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NET DECREASE IN CASH (6,161) (3,731)
CASH, beginning of quarter 6,161 32,502
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CASH, end of quarter $ -0- $ 28,771
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</TABLE>
4 OF 8
<PAGE> 5
M. H. RHODES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTES
1. In the opinion of the Company the accompanying unaudited condensed
consolidated financial statements contain all normal recurring accrual
adjustments necessary to present fairly: (A) The results of operations for
the three month periods ended March 31, 1995 and March 31, 1996; (B) The
financial position at March 31, 1996 and December 31, 1995; and (C) The cash
flows for the three month periods ended March 31, 1995 and March 31, 1996.
2. The results for the three month period ended March 31, 1996 are not
necessarily indicative of the results for the entire year.
3. Inventories consisted of the following:
<TABLE>
<CAPTION>
December 31 March 31
1995 1996
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<S> <C> <C>
Raw Materials and component parts.... $1,404,565 $1,279,673
Work in Process...................... 1,418,297 1,223,717
Finished Goods....................... 327,400 346,888
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TOTAL........................... $3,150,262 $2,850,278
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</TABLE>
4. The earnings per share is calculated by dividing net income by the weighted
average of the outstanding shares. The weighted average of shares
outstanding is calculated by adding the number of shares outstanding each
day of the period and dividing by the number of days in the period.
5. The consolidated financial statements include the accounts of M. H. Rhodes,
Inc. and its 96% owned subsidiary, M. H. Rhodes (Canada) Limited.
5 of 8
<PAGE> 6
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
New orders for the first quarter of 1996 increased 12% compared to the first
quarter of 1995. The principal reason for this increase was several customer's
two year repeat blanket orders were recorded. The total backlog on March 31,
1996 was $3,302,000 compared to $3,313,000 on March 31, 1995.
Net sales for the first quarter of 1996 were $1,989,000, a 15% decrease compared
to the first quarter of 1995. This decrease was attributed from low customer
orders requiring shipment in the first quarter of 1996 compared to the first
quarter of 1995. This was principally in the distributor and residential lines.
Cost of Goods Sold as a percentage of Net Sales increased to 84% for the 1996
first quarter as compared to 78% for the same quarter in 1995. This increase was
due principally to fixed expenses within the cost of sales that could not
decrease in proportion to the decline in sales.
Selling, General and Administrative expenses increased to 21% of Net Sales for
the 1996 first quarter as compared to 19% for the same quarter in 1995. Although
expenses declined 8%, the Selling, General and Administrative percent of Net
Sales increased as a result of fixed expenses not decreasing in proportion to
the sales decline.
Interest expense for the 1996 first quarter decreased compared to the same
quarter in 1995. This was due to the following: (1) A lower prime rate which
decreased borrowing cost; and (2) Lower principal balances which decreased
interest expenses.
Other expenses were prior year intangible assets reclassified as fully written
off.
A benefit for income tax for the 1996 first quarter was recorded as a favorable
adjustment for prior years accrued taxes that did not materialize.
On a consolidated basis, M.H. Rhodes, Inc. had a Net Loss of $123,000
for the first quarter of 1996 as compared to a Net Income of $17,000
for the first quarter of 1995. The principal reason for this was the
sales decline.
Financial Condition as of March 31, 1996
Working capital for the first quarter of 1996 decreased $67,000 over the
December, 1995 level. This decrease was the result of a decrease in inventories
which resulted in reductions in the current liabilities.
6 of 8
<PAGE> 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - 27
b. Reports on Form 8-K -
A report on Form 8-K was filed on January 31, 1996 reporting the
changing of the Company's Certified Accountants from Whittlesey &
Hadley, P.C., 147 Charter Oak Avenue, Hartford, CT 06106 to Riggs,
Mahoney & Sabol, One State Street, Hartford, CT 06103 effective as
of January 31, 1996.
7 of 8
<PAGE> 8
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.
M. H. RHODES, INC.
By: /s/ Allan D. Springer
-----------------------------
Allan D. Springer
Its Vice President of Finance
and Chief Financial Officer
Dated: April 23, 1996
8 of 8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,162,287
<ALLOWANCES> 0
<INVENTORY> 2,850,278
<CURRENT-ASSETS> 4,109,394
<PP&E> 3,869,344
<DEPRECIATION> 3,055,349
<TOTAL-ASSETS> 4,947,552
<CURRENT-LIABILITIES> 2,090,280
<BONDS> 0
0
0
<COMMON> 300,880
<OTHER-SE> 2,184,403
<TOTAL-LIABILITY-AND-EQUITY> 4,947,552
<SALES> 1,989,130
<TOTAL-REVENUES> 1,989,130
<CGS> 1,670,669
<TOTAL-COSTS> 1,670,669
<OTHER-EXPENSES> 416,362
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33,021
<INCOME-PRETAX> (139,151)
<INCOME-TAX> (16,452)
<INCOME-CONTINUING> (122,699)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (122,699)
<EPS-PRIMARY> (.61)
<EPS-DILUTED> .00
</TABLE>
