SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended March 31, 1998 Commission file number: 0-17824
REXHALL INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
California 95-4135907
(State of Incorporation) (IRS Employer Identification No.)
46147 7th Street West, Lancaster California 93534
(Address of principal executive offices) (Zip Code)
(805) 726-0565
(Registrant's telephone number, including area code)
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 _____.
Applicable only to Corporate Issuers
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 2,776,891 as of 3/31/98.
<PAGE>
REXHALL INDUSTRIES, INC.
INDEX
PART 1 - FINANCIAL INFORMATION PAGE NUMBER
Item 1.
Financial Statements:
Balance Sheets at March 31, 1998 3
and December 31, 1997
Statements of Operations for the
three months ended March 31,1998
and March 31, 1997 4
Statements of Cash Flows for the
three months ended March 31, 1998
and March 31, 1997 5
Notes to Condensed Financial Statements
as of March 31, 1998 6
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II - OTHER INFORMATION
Reports on Form 8-K 11
Reports on Form 8-K.
8-K 1/5/98, 8-K 1/8/98, 8-KA 2/23/98 11
Signatures 12
<PAGE>
(Audited) (Unaudited)
December 31 Mar 31
PART I - FINANCIAL INFORMATION 1997 1998
Item 1. - Financial Statements
REXHALL INDUSTRIES, INC.
CONDENSED BALANCE SHEETS
Assets:
Current Assets:
Cash and Cash Equivalents $ 811,000 $ 303,000
Accounts Receivable 5,378,000 6,984,000
Inventories 9,439,000 8,748,000
Other Current Assets 59,000 80,000
Income Tax Receivable 337,000 ----
Deferred Income Taxes 2,197,000 2,197,000
Total Current Assets 18,221,000 18,312,000
Property and Equipment - Net 4,957,000 4,992,000
Other --- 190,000
TOTAL ASSETS $23,178.00 $23,494,000
Liabilities and Shareholders' Equity:
Current Liabilities:
Accounts Payable 6,111,000 5,803,000
Restructuring Reserve 605,000 545,000
Warranty Allowance 937,000 914,000
Accrued Legal Settlement 1,590,000 1,590,000
Dealer Incentives 608,000 489,000
Other Accrued Liabilities 987,000 1,091,000
Current Portion of long-term dept 27,000 28,000
Total Current Liabilities 10,865,000 10,460,000
Deferred Income Tax Liabilities 36,000 36,000
Long Term Debt 797,000 790,000
Total Liabilities 11,698,000 11,286,000
Shareholders' Equity:
Preferred Stock - no par value;
Authorized 1,000,000 shares; no
shares outstanding at March 31,
1998 and December 31, 1997
Common Stock - no par value;
Authorized 10,000,000 shares;
Outstanding 2,714,000 shares
at December 31,1997 and 2,777,000
shares at March 31, 1998 6,267,000 6,452,000
Retained Earnings 5,213,000 5,756,000
Total Shareholders' Equity 11,480,000 12,208,000
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $23,178,000 $23,494,000
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
REXHALL INDUSTRIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31, 1997 March 31, 1998
Sales $17,665,000 $14,170,000
Cost of Sales 15,265,000 12,007,000
Gross Profit 2,400,000 2,163,000
Selling, General, Administrative
Expenses and Other Expenses 1,496,000 1,258,000
Income Before Income Taxes 904,000 905,000
Income Taxes 366,000 362,000
Net Income $ 538,000 $ 543,000
Basic Net Income Per Common Share $ .19 $ .20
Diluted Net Income Per Common and Equivalent $ .19* $ .20
Share
Weighted Average Number of
Common Shares Outstanding-Basic 2,761,000 2,722,000
Weighted Average Number of
Common and Equivalent Shares
Outstanding - Diluted 2,856,000 2,771,000
*Originally reported as $.20 per share based on 2,725,000 shares outstanding,
however, considering the 5% stock dividend paid on 5/26/97, adjusted earnings
to $.19 per share.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. - Financial Statements
REXHALL INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
1997 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $538,000 $543,000
Adjustments to reconcile net income to net
cash used in
Operating Activities:
Depreciation and amortization 50,000 83,000
(Increase) in accounts receivable (1,763,000) (1,606,000)
Decrease in inventories 1,175,000 691,000
(Increase) in other current assets (30,000) (21,000)
(Decrease) in accounts payable (806,000) (308,000)
Increase(Decrease) in other current liabilities (93,000) 21,000
(Decrease) In dealer incentives --- (119,000)
Increase in non-current accrued liabilities 112,000 ----
Income tax receivable 267,000 337,000
Net cash used in operating activities (550,000) (379,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (93,000) (118,000)
Net cash(used) in investing activities (93,000) (118,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (8,000) (6,000)
Repurchase of stock (45,000) (5,000)
Net cash used in financing activities (53,000) (11,000)
NET DECREASE IN CASH AND CASH
EQUIVALENTS (696,000) (508,000)
BEGINNING CASH AND CASH EQUIVALENTS 742,000 811,000
ENDING CASH AND CASH EQUIVALENTS $ 46,000 $ 303,000
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1.
REXHALL INDUSTRIES, INC.
Notes to the Condensed Financial Statements
March 31, 1998
1. Basis of Presentation:
The accompanying unaudited condensed Financial Statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
However, in the opinion of management, they include all adjustments,
consisting of normal accruals, necessary to present fairly the information
set forth herein in accordance with generally accepted accounting principles
for interim reporting. Prior period financial statements have been restated
to conform with current period financial statement presentation.
For further information refer to the Financial Statements and footnotes
included in the Registrant's Annual Report on Form 10-K for year ended
December 31, 1997.
The Results of Operations for any interim period are not necessarily
indicative of the results to be expected for the full year.
2. Summary of Significant Accounting Polices:
Income Taxes
Income tax expense is based upon the estimated effective tax rate for the
entire fiscal year. The effective tax rate is subject to ongoing evaluation
by management.
Earnings Per Share
Basic earnings per share represents net earnings divided by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share represents net earnings divided by the weighted-average
number of shares outstanding, inclusive of the dilutive impact of common
stock equivalents. During the first quarters ended March 31, 1998 and March
31, 1997, the difference between basic and diluted earning per share was due
to the dilutive impact of options to purchase common stock.
Recently Issued Pronouncements
In June 1997, The Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income ("SFAS" 130"). SFAS 130 established standards for the reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general-purpose financial statements. SFAS 130
requires all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
<PAGE>
statement displayed with the same prominence as other financial statements.
SFAS 130 does not require a specific financial statement format but requires
an enterprise to display an amount representing total comprehensive income
for the period covered by the financial statement. Comprehensive income
include items such as net income, changes in value of available for sale
securities and foreign currency translation gains and losses. SFAS 130
requires an enterprise to (a) classify items of other comprehensive income by
there nature in a financial statement and (b) display the accumulated balance
of other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of statement of financial
position. SFAS 130 is effective for fiscal years beginning after December 15,
1997. There is no difference between net income and comprehensive income
for quarter ended March 31, 1998 or March 31, 1997.
In June 1997, FASB issued Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
("SFAS 131"). SFAS 131 established standards for public business
enterprises to report information about operating segments in annual
financial statements and requires those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also established standards for related disclosures about
products and services, geographic areas and major customers. SFAS 131
requires, among other items, that a public business enterprises report a
measure of segment profit or loss, certain specific revenue and expense
items, and segment assets information about the revenues derived from the
enterprise's products or services and major customers. SFAS 131 also
requires the enterprise report descriptive information about the way the
operating segments were determined and the products and services provided by
the operating segments. SFAS 131 is effective for financial statements for
periods beginning after December 15, 1997. In the initial year of
application, comparative information for earlier years is to be restated.
SFAS 131 need not be applied to interim financial statements in the initial
year of application, but comparative information for interim periods in the
initial year of application is to be reported in financial statements for
interim periods in the second year of application.
The Company adopted Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related information, (SFAS
131) during the year ended December 31, 1997. Due to the closure of the
Elkhart, Indiana manufacturing facility announced during fiscal 1997,
management no longer geographically defines its business based on its
production facilities. Effective January 1, 1998 the Company measures its
profitability and result of operations based on the remaining operating
segment in Lancaster, California.
3. Detail of Inventory December 31, 1997 March 31,1998
Raw Material $ 4,659,000 3,578,000
Work in Process 2,124,000 1,013,000
Finished Motorhomes 2,656,000 4,157,000
TOTAL $9,439,000 $8,748,000
<PAGE>
4. Income Per Share
The following is a reconciliation of the basic and diluted income per share
computation for the quarters ended March 31, 1997 and 1998.
Three Months Ended
March 31, 1997 March 31, 1998
Net income used for basic
diluted income per share $ 538,000 543,000
Share of Common Stock and
Common Stock equivalents:
Weighted average shares used
In basic computation 2,761,000 2,722,000
Weighted stock option 95,000 49,000
Shares used in diluted computation 2,856,000 2,771,000
Income per share:
Basic $ 0.19 $ 0.20
Diluted 0.19 0.20
During 1997, the Company issued a 5% stock dividend, resulting in the
issuance of 131,000 shares of common stock. The impact of this stock
dividend has been retroactively recorded in the per share calculation
for the three months ended March 31, 1997.
5. RESTRUCTURING
During 1997, the Company's Board of Directors approved a restructuring of the
Company's operations. The restructuring plan provided for changes in the
operations, and production strategies. In implementing these plans, the
Company decided to cease manufacturing operations at it's Elkhart, Indiana
plant. The Company recorded charges aggregating $1,042,000 as a result of
this restructuring plan in the fourth quarter of 1997. The ceasing of
manufacturing operations at the Elkhart facility was made in conjunction
with the recently completed expansion of the California facility to
accommodate the projected increase in production at the California plant.
As a result of this repositioning, the Company determined that certain of
it's fixed assets and inventories located at the Elkhart plant should be
written down, resulting in a charge of approximately $937,000.
Addiitionally, the Company recorded severance, rebates and other related
costs relating to the closure of the Elkhart plan for approximately $105,000,
which was included as a restructuring charge in the accompanying statements
of operations for the year-ended December 31, 1997. As of March 31, 1998,
the Company had a reserve of $545,000 relating to this restructuring.
Restructuring reserve at 12/31/97 $605,000
Payments and asset write-downs through
March 31, 1998 60,000
Future cash outlay and charges $545,000
<PAGE>
PART I - FINANCIAL INFORMATION
Item 2. - Management Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
For the Three Months ended March 31, 1998 and
For the Three Months ended March 31, 1997
Sales - 1998 Compared with 1997
Sales for the quarter ended March 31, 1998, totaled $14,170,000 as compared
to $17,665,000 in 1997. The units sold for the quarter ended March 31, 1998
were 231 vs. 307 in 1997. The decrease in sales was principally due to the
unusual amount of inclement weather conditions that hampered first quarter
retail sales efforts, limited availability of Allison Transmissions and the
lead time needed to increase production at the California facility to
compensate for the production closure at Indiana.
Cost of Sales - 1998 compared with 1997
The Cost of Sales as a percentage of sales for the first quarter of 1998 was
84.7% vs 86.4% in the first quarter of 1997. The cost of sales percentage
for 1998 decreased due to the centralization of production in the California
facility.
Gross Profit for the first quarter of 1998 was 15.3% vs 13.6% for the first
quarter of 1997. This increase was due to the cost decrease discussed in
Cost of Sales above. The Company anticipates that gross margins should
improve in the future due to economies of scale realized in operating one
production facility. However there can be no assurance that gross margins
will improve due to the unknown nature of competitors within the industry.
Selling, General Administrative and Other Expenses-1998 compared with 1997
Selling, General Administrative, and Other Expenses decreased in the first
quarter of 1998 by $238,000, mostly as a result of the decrease in direct
selling costs associated with the reduction in sales as discussed in Sales
above. Selling, General and Administrative and Other Expenses, as a
percentage, were 8.9.% of sales in 1998 as compared to 8.5% in the first
quarter of 1997. This increase was due to the expense amounts being spread
over a smaller sales base.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 2. - Management Discussion and Analysis or Plan of Operations
Income before taxes - 1998 compared with 1997
The decrease in income before taxes in the first quarter of 1998 was due to
reduced sales as discussed in section Sales above. The increase in income
after taxes in the first quarter of 1998 was due to reduced costs of sales
and efficiencies gained from the Company's restructuring plan adopted in the
fourth quarter of 1997, including efficiencies gained from the Indiana plant
closure.
Financial Condition, Capital Resources and Liquidity
The Company's cash needs are primarily to support it's inventory production,
refurbishment of facilities and equipment and systems development. The
Company has historically financed its operations primarily with internally
generated funds and trade credit. At March 31, 1998, working capital was
$7,852,000 as compared to working capital of $7,356,000 at December 31, 1997.
The Company has available a $3,500,000 revolving line of credit with a bank
expiring on June 1, 1998. At March 31, 1998, no amounts were outstanding
under this line. The line of credit agreement requires the compliance with
certain financial and operations covenants as defined in the agreement. The
Company was not in compliance with certain of its covenants as of March 31,
1998. However, the Company requested and received a waiver of such
non-compliance.
Cash used in operating activities for the first quarter ended March 31, 1998
was $379,000 as compared to $550,000 for the comparable period in 1997.
During the first quarter of 1998, accounts receivable increased by $1,606,000
and accounts payable decreased by $308,000. These cash flow uses were offset
by a reduction in inventory of $691,000 and net income of $543,000 for the
period. During the first quarter $60,000 of cash was used to execute the
Company's restructuring plan adopted in the fourth quarter of 1997.
Cash flows from investing activities for the first quarter ended March 31,
1998 consisted solely of capital expenditures of $118,000 as compared to
$93,000 for comparable period in 1997. The Company's capital expenditures
for the remainder of 1998 are currently expected to be approximately,
$150,000 and will relate to refurbishment and expansion of certain
production equipment and the enhancement of management information system.
Cash flows from financing activities for the first quarter ended March 31,
1998 consisted principally of a stock repurchase of $5,000 and repayment of
long term debt of $6,000. The Company will buy back stock in the open market
from time to time when the market price is deemed to be appropriate by
management. Future repurchases of common stock for the remainder of 1998 are
not expected to be significant.
Management believes that funds generated from operation, available borrowing
under its line of credit and the use of trade credit will be sufficient to
satisfy the Company's working capital requirements and commitments for
capital expenditures through the first quarter of 1999.
SEASONALITY
The Company's business is subject to seasonal and quarterly fluctuations.
Historically, the Company has realized a higher portion of its sales in the
second quarter and third quarter, consistent with the summer vacation season.
This is consistent with industry trends.
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF "SAFE HARBOR PROVISIONS"
OF THE PRIVATE SECURITY LITIGATION REFORM ACT OF 1995
Certain statements contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations that are not related to
historical results are forward looking statements. Actual results may differ
materially from those projected or implied in the forward looking statements.
Further, certain forward looking statements are based upon assumptions of
future events which may not prove to be accurate. These forward looking
statements involve risks and uncertainties which are more fully described in
Item 1, Part I of the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997.
I - OTHER INFORMATION
Item 1 - Legal Proceedings
Legal Settlement - The class action lawsuit Masterjohn et al vs. Rexhall, et
al, Case No. 752188 filed in the Superior Court of Orange County, California
has been settled subject to court approval. Under the agreement Rexhall
would pay $825,000 in cash, and issue one coupon per vehicle owned by members
of the class of $1250 towards purchase of a new Rexhall vehicle or $200
toward service, parts and labor. Coupons would be redeemable at Rexhall's
two service centers in Indiana and California, as well as three other
dealerships geographically dispersed. The total number of vehicles owned by
class members is estimated at approximately 5,000. The Company has recorded
a charge of $1,590,000 in 1997 relating to this settlement.
Item 2. - Reports on Form 8-K
a) Reports on Form 8-K:
8-K 1/5/98 0000850476-98-000002
8-K 1/8/98 0000850476-98-000005
8-KA 2/23/98 0000850476-98-000007
<PAGE>
REXHALL INDUSTRIES, INC.
SIGNATURES
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.
REXHALL INDUSTRIES, INC. by
(Registrant)
Date: May 15, 1998 /S/William J. Rex
William J. Rex
Chairman, President and
Chief Executive Officer
Date: May 15, 1998 /S/Phillip J. Parks
Phillip J. Parks
Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 303,000
<SECURITIES> 0
<RECEIVABLES> 6,984,000
<ALLOWANCES> 0
<INVENTORY> 8,748,000
<CURRENT-ASSETS> 18,312,000
<PP&E> 4,992,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,494,000
<CURRENT-LIABILITIES> 10,460,000
<BONDS> 0
0
0
<COMMON> 6,452,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 23,494,000
<SALES> 14,170,000
<TOTAL-REVENUES> 14,170,000
<CGS> 12,007,000
<TOTAL-COSTS> 12,007,000
<OTHER-EXPENSES> 1,258,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 905,000
<INCOME-TAX> 362,000
<INCOME-CONTINUING> 543,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 543,000
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
