<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, 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 June 30, 1997, 196,736 shares of Common Stock outstanding.
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<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
1996 1997
---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $ 137,750 $ 53,714
Accounts Receivable, net of allowance
for doubtful accounts 1,091,401 1,052,801
Inventories 2,839,417 2,997,984
Prepaid Expenses and Other 38,716 70,351
----------- -----------
TOTAL CURRENT ASSETS 4,107,284 4,174,850
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Buildings and Improvements 1,270,698 1,270,698
Machinery and Equipment 2,529,388 2,508,971
Land 65,000 65,000
Construction in Progress 8,250 8,250
----------- -----------
Sub-total 3,873,336 3,852,919
Less: Accumulated Depreciation (3,114,294) (3,140,748)
----------- -----------
NET PROPERTY, PLANT AND EQUIPMENT 759,042 712,171
----------- -----------
OTHER ASSETS 20,206 26,053
----------- -----------
TOTAL ASSETS $ 4,886,532 $ 4,913,074
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Notes Payable $ 393,755 $ 404,158
Current Portion of Long Term Debt 256,173 264,968
Accounts Payable 531,843 432,573
Other Accrued Expenses 321,295 350,489
----------- -----------
TOTAL CURRENT LIABILITIES 1,503,066 1,452,188
----------- -----------
LONG-TERM DEBT, LESS CURRENT PORTION 726,537 646,225
----------- -----------
OTHER NON-CURRENT LIABILITIES 100,000 100,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
Redeemable Common Stock, $1.00 par value,
73,321 shares outstanding in 1996 and
67,458 shares outstanding in 1997 73,321 67,458
SHAREHOLDERS' EQUITY:
Common Stock, $1.00 par value, 400,000
shares authorized, 300,880 issued and
129,278 shares outstanding in 1996
and 1997 227,559 233,422
Paid in Capital 3,697 3,697
Retained Earnings 3,980,871 4,097,580
----------- -----------
4,212,127 4,334,699
Less: Treasury Stock, at cost 104,144
shares in 1997 and 98,281 in 1996 (1,048,431) (1,092,404)
Unallocated ESOP shares, 18,105 (680,088) (595,092)
----------- -----------
$ 2,483,608 $ 2,647,203
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TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 4,886,532 $ 4,913,074
----------- -----------
</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 SIX MONTH PERIOD
ENDED JUNE 30 ENDED JUNE 30
------------- -------------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 1,928,035 $ 2,055,743 $ 3,917,165 $ 4,039,084
COST OF GOODS SOLD 1,594,714 1,579,992 3,265,383 3,099,085
----------- ----------- ----------- -----------
GROSS PROFIT 333,321 475,751 651,782 939,999
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 415,885 383,647 832,247 771,082
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) (82,564) 92,104 (180,465) 168,917
OTHER INCOME (EXPENSE):
INTEREST EXPENSE (34,786) (25,023) (67,807) (48,726)
OTHER INCOME (EXPENSE), NET 381 1,020 (7,848) 2,518
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE
INCOME TAXES (116,969) 68,101 (256,120) 122,709
PROVISION (BENEFIT)
FOR INCOME TAXES 3,000 3,000 (13,452) 6,000
----------- ----------- ----------- -----------
NET INCOME (LOSS) (119,969) 65,101 (242,668) 116,709
TRANSLATION ADJUSTMENTS (572) -- (16) --
BEGINNING RETAINED EARNINGS 4,036,719 4,032,479 4,158,862 3,980,871
----------- ----------- ----------- -----------
ENDING RETAINED EARNINGS $ 3,916,178 $ 4,097,580 $ 3,916,178 $ 4,097,580
----------- ----------- ----------- -----------
AVERAGE SHARES OUTSTANDING 202,599 196,736 202,599 196,736
EARNINGS (LOSS) PER SHARE $ (.59) $ .33 $ (1.20) $ .59
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>
SIX MONTH PERIOD
ENDED JUNE 30
-------------
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1997
---- ----
<S> <C> <C>
Net Income (Loss) $ (242,668) $ 116,709
----------- -----------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Gain on sale of fixed assets (1,000) (225)
Depreciation 71,464 59,256
ESOP expense 84,996 84,996
Translation adjustments (16) --
Amortization of other assets 9,204 3,919
Change in assets and liabilities:
Decrease in accounts receivable 280,495 38,600
(Increase) decrease in inventories 359,288 (158,567)
Increase in prepaid expenses and other (25,448) (39,885)
Decrease in accounts payable (34,671) (99,270)
Increase (decrease) in accrued expenses (151,531) 29,194
Decrease in other noncurrent
liabilities (15,649) --
----------- -----------
Total adjustments 577,132 (81,982)
----------- -----------
Net cash provided by (used in)
operating activities 334,464 34,727
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (19,546) (13,908)
Proceeds from sale of plant, property and
equipment 1,000 225
----------- -----------
Net cash used in investing activities (18,546) (13,683)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from additional borrowings 3,822,771 2,193,342
Repayments of debt (4,051,011) (2,298,423)
----------- -----------
Net cash used in financing activities (288,240) (105,081)
----------- -----------
NET INCREASE (DECREASE) IN CASH 87,678 (84,037)
CASH AND CASH EQUIVALENTS, beginning of period 32,502 137,750
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 120,180 $ 53,713
----------- -----------
</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 and six month periods ended June 30, 1996 and June 30, 1997; (B)
The financial position at June 30, 1997 and December 31, 1996; and (C) The
cash flows for the six month periods ended June 30, 1996 and June 30, 1997.
2. The results for the six month period ended June 30, 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, June 30,
1996 1997
---- ----
<S> <C> <C>
Raw materials & component parts ...... $1,576,083 $1,552,346
Work-in-process ...................... 843,654 854,511
Finished goods ....................... 419,680 591,127
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$2,839,417 $2,997,984
---------- ----------
</TABLE>
4. The earnings (loss) per share is calculated by dividing net income (loss) 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 six month period ended June
30, 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-based 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 at a floating rate
per annum equal to the prime rate plus two percent (2.0%).
5 of 8
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
New orders for the second quarter of 1997 increased 38% compared to the second
quarter of 1996. The principal reason for this was an increase in the recording
of export business relating both to the Timer & Switch and Photocontrol lines.
The total backlog on June 30, 1997 was $3,810,000, compared to $3,189,000 on
June 30, 1996 or a 19% increase. The reason for this increase was the new export
business mentioned above which the majority of these orders will be shipped in
1997.
Net sales for the second quarter of 1997 were $2,055,743, an increase of 7%
compared to the second quarter of 1996. The principal reason for this increase
was the development of a new product that began shipping at the end of 1996 in
the Timer & Switch line for a selected customer in the Original Equipment
Manufacturers (OEM) segment.
Cost of goods sold as a percentage of net sales favorably decreased to 77% for
the second quarter of 1997 as compared to 83% for the same quarter of 1996. The
principal reasons for this were: (1) Price increases for the OEM and Distributor
products; (2) No unfavorable inventory charges were recorded as in the second
quarter of 1996; and (3) The elimination of non-profitable products.
Selling, general and administrative expenses as a percentage of net sales were
19% for the second quarter of 1997 as compared to 22% for the same quarter in
1996. The principal reasons for this were: (1) Elimination of Canadian expenses
as a result of the Company ceasing active business operations for the Canadian
subsidiary; and (2) Lower insurance costs.
Interest expense for the second quarter of 1997 decreased compared to the same
quarter in 1996. The main reasons for this were lower principal balances on the
revolving line of credit $96,000 down and long term debt principal balances
$219,000 down.
The Net Income for the second quarter 1997 was $65,000 compared to a Net Loss of
$120,000 for the second quarter of 1996. The principal reasons for this were:
(1) Higher sales volume; (2) Elimination of unfavorable inventory adjustments;
and (3) The shutdown of the Canadian subsidiary.
Financial Condition as of June 30, 1997
Working capital for the second quarter of 1997 increased $127,000 over the
December 1996 level. This was caused by a rise in inventories which resulted in
an increase in Accounts Payable. Cash was then utilized to reduce the Accounts
Payable.
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 19, 1997 at 10:00 am.
b. At the Annual Meeting of Shareholders, the following directors were
elected to serve until the next meeting: A. J. Campanelli, E. J.
Doyle, J. T. Mayerhofer, J. L. Morelli, and J. W. Pogmore.
The votes cast at the Annual Meeting of Shareholders for the
election of Directors were as follows:
<TABLE>
<CAPTION>
Director For Against
-------- --- -------
<S> <C> <C>
A. J. Campanelli 96,054 36,475
E. J. Doyle 96,284 36,245
J. T. Mayerhofer 98,565 33,964
J. L. Morelli 98,614 33,915
J. W. Pogmore 97,114 35,415
</TABLE>
c. At the Annual Meeting of Shareholders, by a vote of 130,975 for, 61
against, with 1,493 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
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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: July 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> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 53,714
<SECURITIES> 0
<RECEIVABLES> 1,052,801
<ALLOWANCES> 0
<INVENTORY> 2,997,984
<CURRENT-ASSETS> 4,174,850
<PP&E> 3,852,919
<DEPRECIATION> 3,140,748
<TOTAL-ASSETS> 4,913,074
<CURRENT-LIABILITIES> 1,452,188
<BONDS> 0
0
0
<COMMON> 300,880
<OTHER-SE> 2,647,203
<TOTAL-LIABILITY-AND-EQUITY> 4,913,074
<SALES> 2,055,743
<TOTAL-REVENUES> 2,055,743
<CGS> 1,579,992
<TOTAL-COSTS> 1,579,992
<OTHER-EXPENSES> 383,647
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,023
<INCOME-PRETAX> 68,101
<INCOME-TAX> 3,000
<INCOME-CONTINUING> 65,101
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,101
<EPS-PRIMARY> .33
<EPS-DILUTED> 0
</TABLE>
