<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
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 March 31, 1997, 202,599 shares of Common Stock outstanding.
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<PAGE> 2
M. H. RHODES, INC. AND SUBSIDIARY
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31 MARCH 31
----------- -----------
ASSETS
1996 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $ 137,750 $ 21,007
Accounts Receivable, net of allow-
ance for doubtful accounts 1,091,401 1,159,875
Inventories 2,839,417 2,982,095
Prepaid Expenses and Other 38,716 38,205
----------- -----------
TOTAL CURRENT ASSETS 4,107,284 4,201,182
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Buildings and Improvements 1,270,698 1,270,698
Machinery and Equipment 2,529,388 2,500,748
Land 65,000 65,000
Construction in Progress 8,250 8,250
----------- -----------
Sub-total 3,873,336 3,844,696
Less:Accumulated Depreciation (3,114,294) (3,109,757)
----------- -----------
NET PROPERTY, PLANT AND EQUIPMENT 759,042 734,939
----------- -----------
OTHER ASSETS 20,206 18,994
----------- -----------
TOTAL ASSETS $ 4,886,532 $ 4,955,115
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes Payable $ 393,755 $ 403,821
Current Portion of Long Term Debt 256,173 256,173
Accounts Payable 531,843 550,995
Other Accrued Expenses 321,295 321,299
----------- -----------
TOTAL CURRENT LIABILITIES 1,503,066 1,532,288
----------- -----------
LONG-TERM DEBT, LESS CURRENT PORTION 726,537 671,792
----------- -----------
OTHER NON-CURRENT LIABILITIES 100,000 100,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
Redeemable Common Stock, $1.00 par value 73,321 73,321
73,321 shares outstanding
STOCKHOLDERS' EQUITY
Common Stock, $1.00 par value, 400,000
shares authorized, 300,880 issued and
129,278 shares outstanding 227,559 227,559
Paid in Capital 3,697 3,697
Retained Earnings 3,980,871 4,032,479
----------- -----------
4,212,127 4,263,735
Less:Treasury Stock, at cost 98,281
shares in 1997 and 1996 (1,048,431) (1,048,431)
Unallocated ESOP shares (680,088) (637,590)
----------- -----------
$ 2,483,608 $ 2,577,714
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 4,886,532 $ 4,955,115
----------- -----------
</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
--------------------------------
ENDED MARCH 31
--------------------------------
1996 1997
----------- -----------
<S> <C> <C>
NET SALES $ 1,989,130 $ 1,983,341
COST OF GOODS SOLD 1,670,669 1,519,093
----------- -----------
GROSS PROFIT 318,461 464,248
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 416,362 387,435
----------- -----------
OPERATING INCOME (LOSS) (97,901) 76,813
OTHER INCOME(EXPENSE):
INTEREST EXPENSE (33,021) (23,703)
OTHER INCOME (EXPENSE), NET (8,229) 1,498
----------- -----------
INCOME (LOSS) BEFORE
INCOME TAXES (139,151) 54,608
PROVISION (BENEFIT)
FOR INCOME TAXES (16,452) 3,000
----------- -----------
NET INCOME (LOSS) (122,699) 51,608
TRANSLATION ADJUSTMENTS 556 --
BEGINNING RETAINED EARNINGS 4,158,862 3,980,871
----------- -----------
ENDING RETAINED EARNINGS 4,036,719 4,032,479
----------- -----------
AVERAGE SHARES OUTSTANDING 202,599 202,599
EARNINGS (LOSS) PER SHARE $ (.61) $ .25
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
---------------------------
ENDED MARCH 31
---------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1997
----------- -----------
<S> <C> <C>
Net Income(Loss) $ (122,699) $ 51,608
----------- -----------
Adjustments to reconcile net income(loss)
to net cash provided by operating
activities:
Gain on sale of fixed assets (1,000) -0-
Depreciation 45,042 29,784
ESOP expense 42,498 42,498
Translation adjustments 556 -0-
Amortization of other assets 7,891 1,211
Change in assets and liabilities:
(Increase)decrease in accounts receivable 89,923 (68,474)
(Increase)decrease in inventories 299,984 (142,678)
(Increase)decrease in prepaid expenses
and other (32,436) 510
Increase(decrease) in accounts payable (102,852) 19,152
Increase(decrease) in accrued expenses (43,927) 4
Decrease in other noncurrent
liabilities (15,188) -0-
----------- -----------
Total adjustments 290,491 (117,993)
----------- -----------
Net cash provided by (used in)
operating activities 167,792 (66,385)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (13,585) (5,685)
Proceeds from sale of plant, property and
equipment 1,000 -0-
----------- -----------
Net cash used in investing activities (12,585) (5,685)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from additional borrowings 1,813,744 1,789,184
Repayments of debt (1,972,682) (1,833,857)
----------- -----------
Net cash used in financing activities (158,938) (44,673)
----------- -----------
NET DECREASE IN CASH (3,731) (116,743)
CASH AND CASH EQUIVALENTS, beginning of period 32,502 137,750
----------- -----------
CASH AND CASH EQUIVALENTS, end of quarter $ 28,771 $ 21,007
----------- -----------
</TABLE>
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<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 month periods ended March 31, 1996 and March 31, 1997; (B) The
financial position at March 31, 1997 and December 31, 1996; and (C) The cash
flows for the three month periods ended March 31, 1996 and March 31, 1997.
2. The results for the three month period ended March 31, 1997 are not
necessarily indicative of the results for the entire year.
3. Inventories are valued at the lower of cost or market using the
First-in, First-out method of accounting. Inventories consisted
of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
------------ ----------
<S> <C> <C>
Raw materials & component parts.... $1,576,083 $1,662,027
Work-in-process.................... 843,654 876,410
Finished goods..................... 419,680 443,659
---------- ----------
$2,839,417 $2,982,096
---------- ----------
</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 for the three month period
ended March 31, 1996 include the accounts of M. H.Rhodes, Inc. and
its 96% owned subsidiary, M. H. Rhodes (Canada) Limited. On
September 30, 1996, the Company ceased active business operation
for the Canadian subsidiary and transferred its assets and
liabilities to its parent company, M. H. Rhodes, Inc. The
Company's Board of Directors dissolved the subsidiary on December
31, 1996.
6. The Company entered into a commercial $750,000 revolving line of credit with
a financial institution in April, 1997. Proceeds from this new line were
used to pay off the prior asset-backed line of credit of $404,000
outstanding on March 31, 1997. The new commercial revolving line of credit
is for an initial fourteen month period and is on a demand basis.
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<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
New orders for the first quarter of 1997 decreased 26% compared to the first
quarter of 1996. The principal reason for this was key original equipment
manufacturer (OEM) customers that placed blanket orders in the first quarter of
1996 have not yet expired. These blanket orders are anticipated to be renewed in
the subsequent quarters of 1997. The total backlog on March 31, 1997 was
$3,321,000 compared to $3,302,000 on March 31, 1996, or a 1% increase.
Net sales for the first quarter of 1997 were $1,983,341, essentially the same as
the first quarter of 1996.
Cost of goods sold as a percentage of net sales decreased to 76.6% for the first
quarter of 1997 as compared to 84% for the same quarter of 1996. The principal
reasons for this were: (1) price increases for the OEM and distributor products;
(2) the elimination of non-profitable items; and (3) a higher margin mix of
products.
Selling, general and administrative expenses as a percentage of net sales were
19.5% for the first quarter of 1997 as compared to 20.9% for the same quarter in
1996. The principal reasons for this were lower legal fees and reduced bank
fees.
Interest expense for the first quarter 1997 decreased compared to the same
quarter in 1996. The principal reason for this was lower principal balances on
the revolving line of credit ($90,000 down) and long term debt principal
balances ($231,000 down).
Other expenses for the first quarter 1997 decreased significantly due to
non-recurring expenses in the first quarter of 1996. These 1996 non-recurring
expenses were: (1) $17,000 inter-company charge from prior years involving the
Canadian subsidiary; (2) $4,000 of intangible amortization assets written off;
and (3) $3,000 bank service charges.
The provision for income tax increased in the first quarter 1997 as compared to
the same quarter 1996. This was due to a non-recurring benefit for income tax
for the first quarter 1996 as a favorable adjustment for prior years accrued
taxes that did not materialize.
Financial Condition as of March 31, 1997
Working capital for the first quarter of 1997 increased $65,000 over the
December 1996 level. This increase was the result of a higher level in
inventories which resulted in a rise in current assets.
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<PAGE> 7
PART II. OTHER INFORMATION
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: /s/ Allan D. Springer
-----------------------
Allan D. Springer
Its Vice President of
Finance and Chief
Financial Officer
Dated: April 25, 1997
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<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> 21,007
<SECURITIES> 0
<RECEIVABLES> 1,159,875
<ALLOWANCES> 0
<INVENTORY> 2,982,095
<CURRENT-ASSETS> 4,201,182
<PP&E> 3,844,696
<DEPRECIATION> 3,109,757
<TOTAL-ASSETS> 4,955,115
<CURRENT-LIABILITIES> 1,532,288
<BONDS> 0
0
0
<COMMON> 300,,880
<OTHER-SE> 2,577,714
<TOTAL-LIABILITY-AND-EQUITY> 4,955,115
<SALES> 1,983,341
<TOTAL-REVENUES> 1,983,341
<CGS> 1,519,093
<TOTAL-COSTS> 1,519,093
<OTHER-EXPENSES> 387,435
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,703
<INCOME-PRETAX> 54,608
<INCOME-TAX> 3,000
<INCOME-CONTINUING> 51,608
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
