<PAGE>
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
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Exchange Act of 1934
For the quarterly period ended September 30, 2000 or
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---- 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 number 1-5654
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EXX INC
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(Exact Name of Registrant as Specified in Its Charter)
Nevada 88-0325271
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
1350 East Flamingo Road, Suite 689, Las Vegas, Nevada 89119-5263
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(Address or Principal Executive Offices) (Zip Code)
(702) 598-3223
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(Registrant's Telephone Number, Including Area Code)
NONE
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(Former Name, Former Address and Former 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
--- ---
Number of shares of common stock outstanding as of September 30, 2000:
11,983,407 Class A Shares and 624,953 Class B Shares.
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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A. Balance Sheets
ASSETS September 30, 2000 December 31, 1999
------ ------------------ -----------------
(unaudited) (audited)
CURRENT ASSETS:
Cash and cash equivalents $ 7,069,000 $ 2,315,000
Short term investments 597,000 3,999,000
Accounts receivable, less
allowances of $86,000
and $84,000 3,008,000 3,357,000
Inventories, at lower of cost or
market:
Raw materials 603,000 890,000
Work in process 142,000 180,000
Finished goods 2,262,000 1,921,000
----------- -----------
3,007,000 2,991,000
Other current assets 623,000 349,000
Refundable income taxes - 111,000
Deferred income taxes 771,000 953,000
----------- -----------
TOTAL CURRENT ASSETS 15,075,000 14,075,000
Property, plant and equipment,
at cost:
Land 41,000 41,000
Buildings and improvements 2,987,000 2,987,000
Machinery and equipment 6,493,000 6,484,000
----------- -----------
9,521,000 9,512,000
Less accumulated depreciation
and amortization 7,391,000 7,187,000
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2,130,000 2,325,000
Long Term Investments 1,577,000 1,620,000
Other assets 201,000 375,000
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TOTALS $18,983,000 $18,395,000
=========== ===========
See Notes to Financial statements
2
<PAGE>
A. Balance Sheets (continued)
LIABILITIES September 30, 2000 December 31, 1999
----------- ------------------- ------------------
(unaudited) (audited)
CURRENT LIABILITIES:
Notes Payable-Current Portion $ 59,000 $ 59,000
Accounts payable and other
current liabilities 3,368,000 3,988,000
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TOTAL CURRENT LIABILITIES 3,427,000 4,047,000
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LONG-TERM LIABILITIES:
Notes Payable, less Current Portion 1,650,000 1,688,000
Pension Liability 576,000 576,000
Deferred Tax Liability 507,000 646,000
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2,733,000 2,910,000
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STOCKHOLDERS' EQUITY
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Preferred stock, $.01 par value;
Authorized 5,000,000 shares;
Common stock, Class A $.01 par value,
Authorized 25,000,000 shares;
12,061,607 shares issued 121,000 177,000
Common stock, Class B $.01 par value,
Authorized 1,000,000 shares;
624,953 shares issued 6,000 9,000
Capital in excess of par value 2,670,000 3,844,000
Accumulated other comprehensive loss (315,000) (378,000)
Retained earnings 10,396,000 9,019,000
Less Treasury Stock at cost (55,000) (1,233,000)
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TOTAL STOCKHOLDERS' EQUITY 12,823,000 11,438,000
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TOTALS $18,983,000 $18,395,000
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See Notes to Financial statements
3
<PAGE>
B. Statements of Income
For the Three-Month For the Nine-Month
Period Ended Period Ended
---------------------- --------------------------
September September September September
30, 2000 30, 1999 30, 2000 30, 1999
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Net sales $4,490,000 $4,005,000 $14,008,000 $15,538,000
Cost of sales 3,077,000 2,450,000 9,167,000 9,375,000
---------- ---------- ----------- -----------
Gross profit 1,413,000 1,555,000 4,841,000 6,163,000
Selling, general and
administrative expenses 939,000 889,000 3,055,000 3,527,000
---------- ---------- ----------- -----------
Operating income 474,000 666,000 1,786,000 2,636,000
Interest expense 24,000 24,000 72,000 90,000
Other income 85,000 128,000 372,000 433,000
---------- ---------- ----------- -----------
Income before provision
for income taxes 535,000 770,000 2,086,000 2,979,000
Provision for
income taxes 182,000 262,000 710,000 1,013,000
---------- ---------- ----------- -----------
Net income $ 353,000 $ 508,000 $ 1,376,000 $ 1,966,000
========== ========== =========== ===========
Net income per common share
Basic $ .03 $ .04 $ .11 $ .15
========== ========== =========== ===========
Diluted $ .03 $ .04 $ .10 $ .15
========== ========== =========== ===========
Weighted average shares outstanding
Basic 12,676,047 12,686,560 12,686,030 12,723,505
========== ========== =========== ===========
Diluted 13,024,215 12,686,560 13,249,669 12,723,505
========== ========== =========== ===========
See Notes to Financial statements
4
<PAGE>
C. Statements of Cash Flow
<TABLE>
<CAPTION>
For the Nine-Month Period Ended
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September 30, 2000 September 30, 1999
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Operating activities:
<S> <C> <C>
Net income $1,376,000 $1,966,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and Amortization 204,000 202,000
Provision for bad debts 2,000 (125,000)
Accrued interest income - (147,000)
Deferred tax benefit (81,000) -
Increase (decrease) in cash attributable to changes in
assets and liabilities:
Accounts receivable 347,000 577,000
Inventories (16,000) 61,000
Other current assets (274,000) (267,000)
Other assets 174,000 59,000
Refundable income taxes 111,000 (112,000)
Accounts payable and other
current liabilities (620,000) (739,000)
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Net cash provided by operating activities 1,223,000 1,475,000
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Cash flows from investing activities:
Purchase and Sale of property and equipment (net) (9,000) (188,000)
Proceeds from sale of Short Term Investments 4,029,000 -
Purchase of Long Term Investments (396,000) -
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Net cash provided by (used in) investing activities 3,624,000 (188,000)
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Cash flows from financing activities:
Payments on Notes Payable (38,000) (35,000)
Purchase of Treasury Stock (55,000) (116,000)
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Net cash (used in) financing activities (93,000) (151,000)
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Net increase in cash and cash equivalents 4,754,000 1,136,000
Cash and cash equivalents
beginning of period 2,315,000 3,383,000
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Cash and cash equivalents,
end of period $7,069,000 $4,519,000
========== ==========
</TABLE>
See Notes to Financial statements
5
<PAGE>
C. Statements of Cash Flow (continued)
For the Nine-Month Period Ended
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September 30, 2000 September 30, 1999
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Supplemental disclosure of cash flow
information:
Cash Paid during the year for:
Interest $ 72,000 $ 90,000
Income taxes 536,000 1,300,000
Supplemental schedule of non-cash investing and financing activities:
NONE
See Notes to Financial statements
6
<PAGE>
D. Notes to Financial Statements
Note 1: The unaudited financial statements as of September 30, 2000 and 1999
-------
reflect all adjustments which are necessary in the opinion of management for a
fair presentation of the results for the periods stated. All adjustments so made
are of a normal recurring nature. Certain financial information and footnote
disclosure normally included in financial statements in accordance with
generally accepted accounting principles have been condensed or omitted. The
reader is referred to the audited consolidated financial statements and notes
thereto included in the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1999.
Note 2: Notes Payable
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Notes Payable represents obligations of the Handi-Pac subsidiary as
follows:
September 30, 2000
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Notes Payable - SBA Loans $ 868,000
Capital Lease payable 841,000
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1,709,000
Current Portion of Long-Term Debt 59,000
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$1,650,000
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During the first quarter 1998, the Company opened a limited credit facility
with a bank for two subsidiaries which includes a $300,000 sub-limit for direct
borrowings and a $150,000 sub-limit for documentary letters of credit all
secured by certain of the Company's money market funds.
As of September 30, 2000, there was no other bank debt for the other
subsidiaries except as noted above.
Note 3: Effective March 8, 2000, the Company paid a 400% stock dividend to
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all shareholders of the Company's Class A and B common stock of record as of
December 16, 1999. The dividend was four shares of the Company's Class A common
stock for each share of Class A and/or Class B common stock owned by a
shareholder. All transactions and disclosures in the consolidated financial
statements, related to the Company's Class A and Class B common stock have been
restated to reflect the effects of the stock dividend. In addition, at the time
of this transaction, the Company retired the Treasury Stock in its possession,
namely 5,591,407 Class A shares and 304,153 Class B shares.
See Notes to Financial statements
7
<PAGE>
Note 4: Comprehensive Income
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Comprehensive Income is as follows:
<TABLE>
<CAPTION>
For the Three-Month Period Ended For the Nine-Month Period Ended
---------------------------------------- ---------------------------------------
September 30, 2000 September 30, 1999 September 30, 2000 September 30, 1999
---------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C>
Net income $ 353,000 $508,000 $1,376,000 $1,966,000
Unrealized gains (losses) on
Debt and equity securities
net of taxes: (203,000) (85,000) 453,000 (417,000)
--------- -------- ---------- ----------
Comprehensive Income $ 150,000 $423,000 $1,829,000 $1,549,000
========= ======== ========== ==========
</TABLE>
Note 5: The following information is reported for industry segment disclosure.
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<TABLE>
<CAPTION>
Three Months Ended September 30, 2000
-------------------------------------
Mechanical
Toys Equipment Consolidated
---- ---------- --------------
<S> <C> <C> <C>
Sales $1,892,000 $2,598,000 $ 4,490,000
========== ========== ============
Operating income $ 296,000 $ 359,000 $ 655,000
========== ==========
General corporate expenses (182,000)
Interest expense (24,000)
Interest income 112,000
Other income (26,000)
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Income before income taxes $ 535,000
============
Nine Months Ended September 30, 2000
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Mechanical
Toys Equipment Consolidated
---- ---------- -------------
Sales $5,207,000 $8,801,000 $14,008,000
========== ========== ============
Operating income $ 631,000 $1,627,000 $ 2,258,000
========== ==========
General corporate expenses (473,000)
Interest expense (72,000)
Interest income 333,000
Other income 40,000
------------
Income before income taxes $ 2,086,000
============
</TABLE>
See Notes to Financial statements
8
<PAGE>
Note 5 - Con't
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<TABLE>
<CAPTION>
Three Months Ended September 30, 1999
-------------------------------------
Mechanical
Toys Equipment Consolidated
---- ---------- -------------
<S> <C> <C> <C>
Sales $1,187,000 $2,818,000 $4,005,000
========== ========== ============
Operating income $ 209,000 $ 573,000 $ 782,000
========== ==========
General corporate expenses 116,000
Interest expense 24,000
Interest income 126,000
Other income 2,000
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Income before income taxes $ 770,000
============
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1999
------------------------------------
Mechanical
Toys Equipment Consolidated
---- ---------- -------------
<S> <C> <C> <C>
Sales $5,120,000 $10,418,000 $15,538,000
========== =========== ============
Operating income $ 548,000 $ 2,674,000 $ 3,222,000
========== ===========
General corporate expenses 586,000
Interest expense 90,000
Interest income 344,000
Other income 89,000
------------
Income before income taxes $ 2,979,000
============
</TABLE>
See Notes to Financial statements
9
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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The following management's discussion and analysis of results of operations
and financial condition contains certain forward-looking statements which are
covered under the safe harbor provisions of the Private Securities Legislation
Reform Act of 1995 with respect to the Company's future financial performance.
Although EXX INC believes the expectations reflected in such forward-looking
statements are based on reasonable assumptions, it can give no assurance that
its expectations will be realized. Forward-looking statements involve known and
unknown risks which may cause EXX INC's actual results and corporate
developments to differ materially from those expected. Factors that could cause
results and developments to differ materially from EXX INC's expectations
include, without limitation, changes in manufacturing and shipment schedules,
delays in completing plant construction and acquisitions, new product and
technology developments, competition within each business segment, cyclicality
of the markets for the products of a major segment, litigation, significant cost
variances, the effects of acquisitions and divestitures, and other risks.
A. Results of Operations
---------------------
Sales for the third quarter of 2000 were $4,490,000 compared to
$4,005,000 in 1999, a 12% increase. For the nine month period, 2000 sales were
$14,008,000 compared to $15,538,000 in 1999. The Toy Segment's third quarter
sales totaled $1,892,000 compared to $1,187,000 in 1999, while the nine month
2000 sales totaled $5,207,000 compared to $5,120,000, in 1999. The Mechanical
equipment group's third quarter sales totaled $2,598,000 compared to $2,818,000
in 1999, while the nine month sales totaled $8,801,000 compared to $10,418,000
in 1999.
Gross profit for the third quarter 2000 totaled $1,413,000 compared
to $1,555,000 in 1999. For the nine-month period, 2000 gross profits were
$4,841,000 compared to $6,163,000 in 1999.
While third quarter Toy division sales show an increase, this is
the result of a swing between the second and third quarter sales and this does
not appear to be indicative of any trend. Management remains committed to
increase its customer base while attempting to improve sales in a highly
competitive and flat market.
The third quarter Mechanical Equipment sales no longer reflect last
year's Y2K benefit to business, thus the decrease in sales and operating profit.
Management continues to actively review options for increasing both the sales
base and market share for both current and future operations.
Operating profit was $474,000 for the third quarter 2000 compared
to $666,000 in 1999. For the nine months, operating profit was $1,786,000
compared to $2,636,000 in 1999.
Interest expense was $24,000 for the third quarter 2000 compared to
$24,000 in the same period last year. For the nine months, interest expense was
$72,000 compared to $90,000 for 1999.
The net income for the third quarter of 2000 was $353,000 or 3
cents per share (basic and diluted), compared to $508,000 or 4 cents per share
(basic and diluted) in the comparable period of 1999. On a nine month basis, the
net income was $1,376,000 or 11 cents per share (basic) and 10 cents per share
(diluted) compared to $1,966,000 or 15 cents per share (basic and diluted) for
the 1999 period.
See Notes to Financial statements
10
<PAGE>
B. Liquidity and Capital Resources
-------------------------------
For the nine months ended September 30, 2000, the Company was
provided with $1,223,000 of cash from operating activities as compared to
$1,475,000 in the corresponding period of the preceding year. For the nine
months ended September 30, 2000, the Company was provided with $3,624,000 of
cash from investing activities, principally from the sale of short term
investments. In the corresponding period of the preceding year, the Company used
$188,000 for investing activities, principally for the purchase of equipment.
Cash used in financing activities during the nine months ended September 30,
2000 of $93,000 relates to note repayments and purchase of treasury stock as
compared to $151,000 in the prior period ended September 30, 1999 which related
to note repayments and purchase of treasury stock.
At September 30, 2000, the Company had working capital of
approximately $11,648,000 and a current ratio of 4.4 to 1. In addition, as
described in Notes to Financial Statements, the Registrant's Handi-Pac
subsidiary has $868,000 of long-term debt outstanding with the SBA. During the
first quarter 1998, the Company opened a limited credit facility with a bank for
two subsidiaries which includes a $300,000 sub-limit for direct borrowings and a
$150,000 sub-limit for documentary letters of credit all secured by certain of
the Company's money market funds. The Registrant considers its working capital,
as described above, to be more than adequate to handle its current operating
capital needs.
PART II. OTHER INFORMATION
Not Applicable
SIGNATURE
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.
EXX INC
By: /s/ David A. Segal
-----------------------------
David A. Segal
Chairman of the Board
Chief Executive Officer
Chief Financial Officer
Date: November 13, 2000
11
