<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 September 30, 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
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 (860) 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
-
There were, as of September 30, 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 SEPTEMBER 30
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ASSETS
1995 1996
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash $ 32,502 $ 10,565
Accounts Receivable 1,252,210 1,355,902
Inventories 3,150,262 2,705,014
Prepaid Expenses and Other 35,622 73,754
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TOTAL CURRENT ASSETS 4,470,596 4,145,235
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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 2,553,036
Land 65,000 65,000
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Sub-total 3,853,929 3,888,734
Less: Accumulated Depreciation (3,009,622) (3,117,012)
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NET PROPERTY, PLANT AND EQUIPMENT 844,307 771,722
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OTHER ASSETS 32,054 21,538
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TOTAL ASSETS $ 5,346,957 $4,938,495
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</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
CURRENT LIABILITIES:
Notes Payable $ 598,979 $ 588,142
Current Portion of Long Term Debt 947,331 818,574
Accounts Payable 513,432 519,881
Other Accrued Expenses 324,909 214,094
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TOTAL CURRENT LIABILITIES 2,384,651 2,140,691
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LONG-TERM DEBT, LESS CURRENT PORTION 275,621 224,484
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OTHER NON-CURRENT LIABILITIES 121,757 103,573
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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 3,936,187
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Sub-Total 4,463,439 4,240,764
Less: Treasury Stock (1,048,431) (1,048,431)
Deferred Compensation (850,080) (722,586)
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NET SHAREHOLDERS' EQUITY $ 2,564,928 $2,469,747
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TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 5,346,957 $4,938,495
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</TABLE>
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M. H. RHODES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
THREE MONTH PERIOD NINE MONTH PERIOD
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
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1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $1,988,850 $2,005,295 $6,136,376 $5,922,460
COST OF GOODS SOLD 1,613,811 1,552,994 4,803,702 4,818,377
---------- ---------- ---------- ----------
GROSS PROFIT 375,039 452,301 1,332,674 1,104,083
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 419,748 394,506 1,269,415 1,226,753
---------- ---------- ---------- ----------
OPERATING INCOME(LOSS) (44,709) 57,795 63,259 (122,670)
INTEREST EXPENSE (38,420) (34,271) (122,889) (102,078)
OTHER INCOME(EXPENSE) (553) (677) 941 (8,525)
---------- ---------- ---------- ----------
INCOME(LOSS) BEFORE INCOME TAX (83,682) 22,847 (58,689) (233,273)
PROVISION (BENEFIT)
FOR INCOME TAX 2,000 3,000 9,000 (10,452)
---------- ---------- ---------- ----------
NET INCOME(LOSS) (85,682) 19,847 (67,689) (222,821)
TRANSLATION ADJUSTMENTS 5,810 162 12,063 146
BEGINNING RETAINED EARNINGS 5,070,704 3,916,178 5,046,458 4,158,862
---------- ---------- ---------- ----------
ENDING RETAINED EARNINGS $4,990,832 $3,936,187 $4,990,832 $3,936,187
---------- ---------- ---------- ----------
AVERAGE SHARES OUTSTANDING 202,599 202,599 202,599 202,599
EARNINGS(LOSS) PER SHARE $ (.42) $ .10 $ (.33) $ (1.09)
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>
NINE MONTH PERIOD
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ENDED SEPTEMBER 30
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CASH FLOWS FROM OPERATING ACTIVITIES: 1995 1996
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<S> <C> <C>
Net Income(Loss) $ (67,689) $ (222,821)
Adjustments to reconcile net income(loss)
to net cash provided by operating
activities:
Gain on sale of Fixed Assets -- (1,000)
Depreciation 114,414 108,668
Amortization of deferred compensation 127,494 127,494
Translation adjustments 12,063 146
Amortization of other assets 9,744 10,517
Change in assets and liabilities:
(Increase)decrease in accounts receivable 249,990 (103,692)
Decrease in inventories 299,759 445,248
Increase in prepaid expenses and other (16,173) (38,132)
Increase(decrease) in accounts payable (411,290) 6,449
Decrease in accrued expenses (60,802) (110,815)
Decrease in other noncurrent
liabilities (1,816) (18,184)
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Total adjustments 323,383 426,699
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Net cash provided by operating
activities 255,694 203,878
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (6,140) (36,084)
Proceeds from sale of plant property &
equipment -- 1,000
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Net cash used in investing activities (6,140) (35,084)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt (6,253,159) (5,812,780)
Proceeds from additional borrowings 5,997,444 5,622,049
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Net cash used in financing activities (255,715) (190,731)
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NET INCREASE(DECREASE) IN CASH (6,161) (21,937)
CASH, beginning of period 6,161 32,502
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CASH, end of period $ -0- $ 10,565
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</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 nine month periods ended September 30, 1996 and 1995; (B) The
financial position at September 30, 1996 and December 31, 1995; and (C) The
cash flows for the nine month periods ended September 30, 1996 and 1995.
2. The results for the nine month period ended September 30, 1996 are not
necessarily indicative of the results for the entire year.
3. Inventories consisted of the following:
<TABLE>
<CAPTION>
December 31 September 30
1995 1996
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<S> <C> <C>
Raw Materials and component parts.. $1,404,565 $1,175,240
Work in Process.................... 1,418,297 1,035,161
Finished Goods..................... 327,400 494,613
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TOTAL......................... $3,150,262 $2,705,014
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</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 third quarter of 1996 increased 17% compared to the third
quarter of 1995. Both Timer & Switch and Photocontrols increased significantly.
The most significant increase in Timer & Switch orders for the third quarter was
in the OEM market. Customers that do not usually place orders in the third
quarter did so by issuing heavy blanket orders. Photocontrol orders were
favorably influenced by large export bookings.
The total backlog on September 30, 1996 was $3,320,000 compared to $3,808,000
for September 30, 1995 or a decrease of 13%. The contributing factor to this was
a high level of future blanket orders that were recorded in June 1995.
Net sales for the third quarter of 1996 were $2,005,295, an increase of 1%
compared to the third quarter of 1995.
Cost of goods sold as a percentage of net sales decreased to 77% for the third
quarter of 1996 as compared to 81% for the same quarter of 1995. This decrease
was a result of: (1) Higher margin products shipped during the third quarter of
1996 compared to the same quarter in 1995; and (2) Payroll reductions.
Selling, General and Administrative expenses decreased to 20% of net sales for
the third quarter of 1996 from 21% of the net sales in the same quarter of 1995.
Lower payroll costs were the principal contributor to this decrease.
Interest expense for the third 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 costs; and (2) Lower principal balances which decreased
interest expenses.
On a consolidated basis for the quarter ending September 30, 1996, M. H. Rhodes,
Inc. had a Net Income of $20,000 as compared to a Net Loss of $86,000 for the
same quarter in 1995. As discussed above, higher margin items and payroll
reductions contributed to this improvement. For the nine month period, the year
to date Net Loss was $222,821 as compared to a Net Loss of $67,689 for the same
nine month period in 1995. The principal reasons for the increased loss were: 1)
Lower sales volume, 2) Less favorable sales mix; and 3) Non-recurring expenses
related to the phaseout of the Canadian Subsidiary.
Financial Condition as of June 30, 1996
Working capital for the third quarter of 1996 decreased $81,000 from the
December 1995 levels. This decrease was the result of a decline in inventories
resulting in reductions in the current liabilities.
6 of 8
<PAGE> 7
PART II. OTHER INFORMATION
Item 5. Other Information
a. The Canadian subsidiary as of September 30, 1996 has ceased all
operations. All products assembled and distributed previously from
Canada will now be completed and shipped to the Canadian customer
directly from the Avon, Connecticut facility.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits - 27
b. Reports on Form 8-K - None
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<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:______________________________________
Allan D. Springer
Its Vice President of Finance
and Chief Financial Officer
Dated: October 17, 1996
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 10565
<SECURITIES> 0
<RECEIVABLES> 1355902
<ALLOWANCES> 0
<INVENTORY> 2705014
<CURRENT-ASSETS> 4145235
<PP&E> 3888734
<DEPRECIATION> 3117012
<TOTAL-ASSETS> 4938495
<CURRENT-LIABILITIES> 2140691
<BONDS> 0
0
0
<COMMON> 300880
<OTHER-SE> 2168867
<TOTAL-LIABILITY-AND-EQUITY> 4938495
<SALES> 5922460
<TOTAL-REVENUES> 5922460
<CGS> 4818377
<TOTAL-COSTS> 4818377
<OTHER-EXPENSES> 1226753
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 102078
<INCOME-PRETAX> (233273)
<INCOME-TAX> (10452)
<INCOME-CONTINUING> (222821)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (222821)
<EPS-PRIMARY> (109)
<EPS-DILUTED> 0
</TABLE>
