<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, 1996
-------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to .
---------- ----------
Commission File No. 0-1412
------
M. H. Rhodes, Inc
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-0509270
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation) Identification No.)
99 Thompson Road, Avon, Connecticut 06001
- ----------------------------------- -------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (860) 673-3281
---------------
- --------------------------------------------------------------------------------
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
---
There were, as of June 30, 1996, 202,599 shares of Common Stock outstanding.
1 OF 8
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
M.H. RHODES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31 JUNE 30
----------- -------
ASSETS
1995 1996
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash $ 32,502 $ 120,180
Accounts Receivable 1,252,210 971,715
Inventories 3,150,262 2,790,974
Prepaid Expenses and Other 35,622 61,070
----------- -----------
TOTAL CURRENT ASSETS 4,470,596 3,943,939
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Buildings and Improvements 1,270,698 1,270,698
Machinery and Equipment 2,518,231 2,539,500
Land 65,000 65,000
----------- -----------
Sub-total 3,853,929 3,875,198
Less: Accumulated Depreciation (3,009,622) (3,082,809)
----------- -----------
NET PROPERTY, PLANT AND EQUIPMENT 844,307 792,389
----------- -----------
OTHER ASSETS 32,054 22,850
----------- -----------
TOTAL ASSETS $ 5,346,957 $ 4,759,178
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes Payable $ 598,979 $ 484,665
Current Portion of Long Term Debt 947,331 861,072
Accounts Payable 513,432 478,761
Other Accrued Expenses 324,909 173,378
----------- -----------
TOTAL CURRENT LIABILITIES 2,384,651 1,997,876
----------- -----------
LONG-TERM DEBT, LESS CURRENT PORTION 275,621 247,954
----------- -----------
OTHER NON-CURRENT LIABILITIES 121,757 106,108
----------- -----------
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 3,916,178
----------- -----------
Sub-Total 4,463,439 4,220,755
Less: Treasury Stock (1,048,431) (1,048,431)
Deferred Compensation (850,080) (765,084)
----------- -----------
NET SHAREHOLDERS' EQUITY $ 2,564,928 $ 2,407,240
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 5,346,957 $ 4,759,178
----------- -----------
</TABLE>
2 OF 8
<PAGE> 3
M. H. RHODES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
THREE MONTH PERIOD SIX MONTH PERIOD
------------------ ----------------
ENDED JUNE 30 ENDED JUNE 30
------------- -------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $1,809,534 $1,928,035 $4,147,526 $3,917,165
COST OF GOODS SOLD 1,365,578 1,594,714 3,189,891 3,265,383
---------- ---------- ---------- ----------
GROSS PROFIT 443,956 333,321 957,635 651,782
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 398,221 415,885 849,667 832,247
---------- ---------- ---------- ----------
OPERATING INCOME (LOSS) 45,735 (82,564) 107,968 (180,465)
INTEREST EXPENSE (42,559) (34,786) (84,469) (67,807)
OTHER INCOME (EXPENSE) 1,077 381 1,494 (7,848)
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAX 4,253 (116,969) 24,993 (256,120)
PROVISION (BENEFIT)
FOR INCOME TAX 3,000 3,000 7,000 (13,452)
---------- ---------- ---------- ----------
NET INCOME (LOSS) 1,253 (119,969) 17,993 (242,668)
TRANSLATION ADJUSTMENTS 5,542 (572) 6,253 (16)
BEGINNING RETAINED EARNINGS 5,063,909 4,036,719 5,046,458 4,158,862
---------- ---------- ---------- ----------
ENDING RETAINED EARNINGS $5,070,704 $3,916,178 $5,070,704 3,916,178
---------- ---------- ---------- ----------
AVERAGE SHARES OUTSTANDING 202,599 202,599 202,599 202,599
EARNINGS (LOSS) PER SHARE $ .01 $ (.59) $ .09 $ (1.20)
CASH DIVIDENDS PER SHARE $ -- $ -- $ -- $ --
</TABLE>
3 OF 8
<PAGE> 4
M. H. RHODES, INC AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTH PERIOD
----------------
ENDED JUNE 30
-------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1995 1996
---- ----
<S> <C> <C>
Net Income (Loss) $ 17,993 $ (242,668)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Gain on sale of Fixed Assets -- (1,000)
Depreciation 85,672 71,464
Amortization of deferred compensation 84,996 84,996
Translation adjustments 6,253 (16)
Amortization of other assets 8,432 9,204
Change in assets and liabilities:
Decrease in accounts receivable 289,568 280,495
Decrease in inventories 185,157 359,288
Increase in prepaid expenses and other (16,918) (25,448)
Decrease in accounts payable (394,199) (34,671)
Increase (decrease) in accrued expenses 49,348 (151,531)
Decrease in other noncurrent
liabilities (1,816) (15,649)
----------- -----------
Total adjustments 296,493 577,132
----------- -----------
Net cash provided by operating
activities 314,486 334,464
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (4,274) (19,546)
Proceeds from sale of plant property &
equipment -- 1,000
----------- -----------
Net cash used in investing activities (4,274) (18,546)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt (4,316,936) (4,051,011)
Proceeds from additional borrowings 4,000,563 3,822,771
----------- -----------
Net cash used in financing activities (316,373) (228,240)
----------- -----------
NET INCREASE (DECREASE) IN CASH (6,161) 87,678
CASH, beginning of period 6,161 32,502
----------- -----------
CASH, end of period $ -0- $ 120,180
----------- -----------
</TABLE>
4 OF 8
<PAGE> 5
M. H. RHODES, INC. AND SUBSIDIARY
NOTES TO 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 and six month periods ended June 30, 1996 and 1995; (B) The
financial position at June 30, 1996 and December 31, 1995; and (C) The cash
flows for the six month periods ended June 30, 1996 and 1995.
2. The results for the six month period ended June 30, 1996 are not
necessarily indicative of the results for the entire year.
3. Inventories consisted of the following:
<TABLE>
<CAPTION>
December 31 June 30
1995 1996
---- ----
<S> <C> <C>
Raw Materials and component parts ........ $1,404,565 $1,359,647
Work in Process .......................... 1,418,297 1,015,191
Finished Goods ........................... 327,400 416,136
---------- ----------
TOTAL .............................. $3,150,262 $2,790,974
========== ==========
</TABLE>
4. The earnings (loss) 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 second quarter of 1996 decreased 27% compared to the second
quarter of 1995. The original equipment manufacturers' (OEM) segment of the
Timer and Switch line incurred the largest decrease. This can be attributed to a
decline in OEM blanket order renewals as a result of slower sales of OEM's to
their customers. As the OEM's inventory is depleted, renewals will occur in the
third and fourth quarters of 1996. The Photocontrol line also declined due to
large blanket orders extending beyond one year which were recorded in the second
quarter of 1995. The total backlog on June 30, 1996 was $3,189,000 compared to
$3,989,000 on June 30, 1995.
Net sales for the second quarter of 1996 were $1,928,000, an increase of 7%
compared to the second quarter of 1995. Heavy orders in the original equipment
manufacturers' (OEM) segment of the Timer & Switch line during the first quarter
contributed to the increased customer shipments in the second quarter.
Cost of Goods Sold as a percentage of Net Sales increased to 83% for the second
quarter of 1996 as compared to 76% for the same quarter in 1995. The principal
reasons for this were: (1) The increase in shipments in the OEM segment were
lower margin items; (2) Non-cash accounting adjustments for prior years' items
capitalized into inventory were charged to earnings due to the decrease in
inventory in 1996; (3) Employee furloughs in the second quarter of 1995 that did
not occur in the second quarter of 1996; (4) Higher depreciation due to an
anticipated increase in capital expenditures; and (5) A customer reimbursement
for special tooling projects recorded in the second quarter of 1995 did not
occur in the second quarter of 1996.
Selling, General and Administrative expenses for the second quarter of 1996 were
22% of Net Sales, the same as for the comparable quarter of 1995.
Interest expense for the second quarter in 1996 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.
On a consolidated basis, M. H. Rhodes, Inc. had a Net Loss of $120,000 for the
second quarter of 1996 as compared to a Net Income of $1,000 for the second
quarter of 1995. The contributing factor to this was the higher cost of sales
in the second quarter of 1996 than in the same quarter of 1995 as explained
above.
Financial Condition as of June 30, 1996
Working capital for the second quarter of 1996 decreased $140,000 over the
December, 1995 level. This decrease was the result of a decline in inventories
which resulted in reductions in the current liabilities.
6 of 8
<PAGE> 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
a. The Annual Meeting of Shareholders was held at the office of the
Company on June 28, 1996 at 10:00 A.M.
b. At the Annual Meeting of Shareholders, the following Directors were
elected to serve until the next meeting: Anthony J. Campanelli,
Edward J. Doyle, Harold T. LeMay and Joseph L. Morelli.
c. At the Annual Meeting of Shareholders, by a vote of 153,625.0627
(for), 1,594 (against) with 9468.6873 abstaining, the public
accounting firm of Riggs & Associates, LLP was selected as the
Company's independent auditors.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - 27
b. Reports on Form 8-K - None
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: July 17, 1996
8 of 8
<PAGE> 9
EXHIBIT INDEX
-------------
Exhibit 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 120,180
<SECURITIES> 0
<RECEIVABLES> 971,715
<ALLOWANCES> 0
<INVENTORY> 2,790,974
<CURRENT-ASSETS> 3,943,939
<PP&E> 3,875,198
<DEPRECIATION> 3,082,809
<TOTAL-ASSETS> 4,759,178
<CURRENT-LIABILITIES> 1,997,876
<BONDS> 0
0
0
<COMMON> 300,880
<OTHER-SE> 2,106,360
<TOTAL-LIABILITY-AND-EQUITY> 4,759,178
<SALES> 1,928,035
<TOTAL-REVENUES> 1,928,035
<CGS> 1,594,714
<TOTAL-COSTS> 1,594,714
<OTHER-EXPENSES> 415,885
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,786
<INCOME-PRETAX> (116,969)
<INCOME-TAX> 3,000
<INCOME-CONTINUING> (119,969)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> (119,969)
<EPS-DILUTED> (.59)
</TABLE>
