UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
ON
FORM 10-K/A
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003 |
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD From to . |
EXX INC
(Exact Name of Registrant as Specified in Its Charter)
| Nevada | 88-0325271 | |
| (State of Incorporation ) | (IRS Employer Identification No.) | |
| 1350 East Flamingo Road, Suite 689, Las Vegas, Nevada | 89119-5263 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
Registrant’s Telephone Number, Including Area Code (702) 598-3223
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Name of Each Exchange on Which Registered | |
| Common Stock Par Value $.01 Class A | American Stock Exchange | |
| Common Stock Par Value $.01 Class B | American Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
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 ¨.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference on Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
Yes ¨ No x
Number of shares of Common Stock, Par Value $.01 per share, outstanding as of March 23, 2004:10,412,307 Class A shares and858,093 Class B shares (exclusive of1,649,300 Class A shares and16,600 Class B shares held in registrant’s treasury). Of the shares outstanding,4,654,948 Class A shares and293,515 Class B shares are held by non-affiliates. The market value of the shares held by non-affiliates was $12,816,932 based on $2.58 and $2.75 per share, respectively of the closing price of the registrant’s Class A and Class B common stock on the American Stock Exchange on June 30, 2003.
Document incorporated by reference: Part III of this Annual Report on Form 10-K incorporates by reference information contained in the Registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held in June, 2004.
Explanatory Note
The purpose of this Amendment No. 1 on Form 10-K/A is to amend our Annual Report on Form 10-K for the year ended December 30, 2003 (the “Original Filing”), which was filed on March 29, 2004. In March 2005, EXX’s management reviewed the allocation of the purchase price in connection with its acquisition of Newcor, Inc. and determined that an additional intangible asset of $3,635,000 relating to customer relationships existed at the purchase date and had not been previously recorded. The intangible asset is being amortized over a five year period commencing on the date of purchase. In connection with this determination, this Amendment No. 1 amends (1) Item 6. Selected Financial Data to update the net income, per share data, book value, total assets, and stockholders’ equity information, (2) Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations to (a) update the 2003 comparison to 2002 as relates to the selling, general and administrative expenses, operating income and net income sections to reflect an amortization charge for certain intangible assets, (b) a further discussion in the Liquidity and Sources of Capital section to reflect these amortization changes, (c) a table summarizing EXX’s contractual cash debt repayment obligations at December 31, 2003 which is being added for clarification, and (d) an additional explanation in the Critical Accounting Policies of an explanation of EXX’s handling of Intangible Assets, and (3) Item 8. Financial Statements which reflects all the changes described above and shows revenue by major product group sold by the operating segments as shown in Footnote 14.
2
| Item 6. | Selected Financial Data. |
| 2003 (A) | 2002 | 2001 (B) | 2000 (B) | 1999 | |||||||||||
Sales and Income | |||||||||||||||
Net sales | $ | 135,474,000 | $ | 16,186,000 | $ | 18,382,000 | $ | 19,163,000 | $ | 21,158,000 | |||||
Income from: | |||||||||||||||
Continuing operations | 5,241,000 | 836,000 | 81,000 | 1,074,000 | 2,445,000 | ||||||||||
Discontinued operations | 576,000 | ||||||||||||||
Net Income | 5,817,000 | 836,000 | 81,000 | 1,074,000 | 2,445,000 | ||||||||||
Per Share Data (C) | |||||||||||||||
Net income-Basic | |||||||||||||||
Continuing operations | $ | .47 | $ | .07 | $ | .01 | $ | .08 | $ | .12 | |||||
Discontinued operations | .05 | ||||||||||||||
Net income | $ | .52 | $ | .07 | $ | .01 | $ | .08 | $ | .12 | |||||
Net income-Diluted | |||||||||||||||
Continuing operations | $ | .43 | $ | .07 | $ | .01 | $ | .08 | $ | .12 | |||||
Discontinued operations | .05 | ||||||||||||||
Net income | $ | .48 | $ | .07 | $ | .01 | $ | .08 | $ | .12 | |||||
Book value | 1.57 | 1.06 | .97 | .93 | .80 | ||||||||||
Financial Position | |||||||||||||||
Current assets | $ | 45,854,000 | $ | 16,365,000 | $ | 15,606,000 | $ | 15,269,000 | $ | 13,886,000 | |||||
Total Assets | 101,065,000 | 18,405,000 | 17,889,000 | 17,688,000 | 16,786,000 | ||||||||||
Current liabilities | 19,390,000 | 4,248,000 | 4,306,000 | 3,720,000 | 4,047,000 | ||||||||||
Current ratio | 2.4 to 1 | 3.9 to 1 | 3.6 to 1 | 4.1 to 1 | 3.4 to 1 | ||||||||||
Working capital | $ | 26,464,000 | $ | 12,117,000 | $ | 11,300,000 | $ | 11,549,000 | $ | 9,839,000 | |||||
Property and equipment, net | 35,858,000 | 1,620,000 | 1,801,000 | 2,025,000 | 2,325,000 | ||||||||||
Long-term debt | 37,846,000 | 1,554,000 | 1,621,000 | 1,690,000 | 1,747,000 | ||||||||||
Stockholders’ equity | 17,691,000 | 11,721,000 | 11,050,000 | 11,427,000 | 10,207,000 | ||||||||||
| (A) | Newcor operations have been included in the Consolidated Financial Statements of EXX commencing January 31, 2003. See Note 3 to the Consolidated Financial Statements. |
| (B) | Restated to reflect change in reporting entity. See Note 3 to the Consolidated Financial Statements. |
| (C) | As adjusted for a 400% stock dividend effective March 8, 2000, Class A and Class B shares retroactively shown. |
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations. |
Please refer to the Forward-Looking Statements and Cautionary Statements at the beginning of this 10-K Report.
Due to the factors noted in the Forward-Looking Statements paragraph and elsewhere in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, our future earnings and stock price may be subject to significant volatility, particularly on a quarterly basis. This could result in an immediate and adverse effect on the trading price of our common stock. Past financial performance should not be considered a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.
3
In January 2003, under the Newcor, Inc. Plan of Reorganization, EXX purchased 11,877 shares or 98.975% of the outstanding common stock of the reorganized Newcor for approximately $5,939,000. See Note 4 to the Consolidated Financial Statements which further discusses this event.
In prior periods, both Newcor and EXX have referred to an impending loss of a supply contract with a major customer. A press release and Form 8-K dated October 3, 2003 announced the signing of a new three year supply contract with that customer with certain reductions in prices and volume offset by certain additional benefits to other Newcor units dealing with the customer’s affiliates. In 2004, it is expected that the new contract will result in a revenue reduction of approximately $9,000,000 in the Mechanical Equipment Segment which amount may be offset by increases in new business for the year from such customer.
2003 Compared to 2002
Net sales in 2003 were $135,474,000 compared to $16,186,000 in 2002 which was an increase of $119,288,000. Net sales represent a 737% increase from the prior year sales, due to the acquisition of Newcor. The Mechanical Equipment segment had total sales of $112,187,000 in 2003 compared to $8,299,000 in 2002, an increase of $103,888,000. The current year sales represent a 1,252% increase from the prior year sales due to the acquisition of Newcor. The Plastics and Rubber segment sales were $23,287,000 in 2003 compared to $7,887,000 in 2002, an increase of $15,400,000. The current year’s sales represent a 195% increase from the prior year sales due to the acquisition of Newcor. Excluding the effect of the Newcor acquisition, net sales in 2003 were $16,000,000 the Mechanical Equipment segment sales in 2003 were $8,298,000 and the Plastics and Rubber segment sales in 2003 were $7,702,000.
Gross profit was $25,126,000 in 2003 compared to gross profit of $5,253,000 in 2002, an increase of $19,873,000 due to the acquisition of Newcor. The Mechanical Equipment segment accounted for a $16,101,000 increase in gross profit while the Plastics and Rubber segment accounted for the difference due to the acquisition of Newcor. Gross profit as a percentage of sales decreased to 19% in 2003 compared to 32% in 2002. Excluding the effect of the Newcor acquisition, gross profit in 2003 was $5,374,000, Mechanical Equipment Segment gross profit was $2,852,000 and the Plastics and Rubber segment gross profit was $2,522,000.
Selling and G&A expenses were $15,107,000 in 2003, an increase of $11,009,000 from $4,098,000 in 2002. The increase related to the acquisition of Newcor, including a $655,000 amortization charge of the customer relationships balance on Newcor’s books. Excluding the effect of the Newcor acquisition, in 2003 selling and G&A expenses were $4,137,000.
Operating income of $10,019,000 in 2003 represented an increase of $8,864,000 from the prior year’s operating income of $1,155,000 due to the acquisition of Newcor, including a $655,000 amortization charge of the customer relationships balance on Newcor’s books. The Mechanical Equipment segment generated operating income of $9,933,000 in 2003, an increase of $9,470,000 from an operating income of $463,000 in 2002, while the Plastics and Rubber segment operating income of $3,001,000 in 2003 represented an increase of $1,767,000 from an operating income of $1,234,000 in 2002, both increases due to the acquisition of Newcor. Corporate and other operating expenses in 2003 increased to $2,414,000 from $542,000 in the prior year due to the acquisition of Newcor, including a $655,000 amortization charge of the customer relationships balance on Newcor’s books. Excluding the effect of the Newcor acquisition, operating income in 2003 was $938,000. The Mechanical Equipment segment in 2003 was $665,000, the Plastics and Rubber segment in 2003 was $1,002,000 and corporate and other operating expenses in 2003 were $729,000.
Interest expense was $2,149,000 in 2003 compared to $144,000 in 2002 due to the acquisition of Newcor. Excluding the effect of the Newcor acquisition, interest expense in 2003 was $106,000.
EXX generated net income of $5,817,000 or $.52 per A & B common share compared to a net income of $836,000 or $.07 per A & B common share in 2002. Excluding the effect of the Newcor acquisition, net income in 2003 was $802,000 or $.07 per A & B common share. There was no equity in losses of Newcor, Inc. in 2002 as the original investment was written off completely in 2001.
EXX reported a deferred tax asset of $1,511,000 at December 31, 2003 and a deferred tax asset of $564,000 at December 31, 2002. Management believes this asset will be realized by taxable earnings in the future.
4
Liquidity and Sources of Capital
During 2003, EXX generated $11,723,000 of cash flows from operating activities compared to $566,000 in 2002. In 2003, cash flow of $15,473,000 was provided from income before depreciation and amortization and deferred income taxes compared to $1,017,000 in 2002. The increase in cash flow in 2003 was principally due to the operations of Newcor. In 2003, cash flows of $2,416,000 were used to fund Newcor’s pension obligations as well as $5,325,000 to decrease accounts payable and other current liabilities which included accruals for administrative expenses associated with Newcor’s bankruptcy Filing and Plan of Reorganization. In 2003, operating cash flows increased $3,884,000 as a result of lower accounts receivable compared to a decrease of $320,000 in 2002 as a result of an increase in accounts receivable.
In 2003, EXX’s investing activities used cash of $1,743,000 compared to using cash of $29,000 in 2002. In 2003, cash was used primarily to purchase property and equipment totaling $5,228,000 offset by $2,550,000 of proceeds from the sale of net assets of a Newcor subsidiary and $935,000 of cash acquired from the acquisition of Newcor, while cash was used primarily to purchase property and equipment in 2002.
During 2003 and 2002, EXX’s financing activities used cash of $7,813,000 and $270,000, respectively. In 2003, EXX paid off $10,462,000 of long-term debt and obtained $2,588,000 from equipment financing and term loans. In addition, Newcor received $61,000 from the sale to minority shareholders of its new stock. While in 2002, EXX purchased $203,000 of treasury stock and made payments on notes totaling $67,000.
5
The following table summarizes the Company’s contractual cash debt repayment obligations at December 31, 2003.
| 2004 | 2005-09 | 2013 | TOTAL | |||||||||
Long Term Debt: | ||||||||||||
Term Note | ||||||||||||
(4% at December 31, 2003) | $ | 743,000 | $ | 3,168,000 | $ | — | $ | 3,911,000 | ||||
Promissory Notes – 6.25%-8.5% | 1,385,000 | 3,022,000 | — | 4,407,000 | ||||||||
Defaulted Notes Payable and Capital Lease Obligations of a subsidiary (a) | 1,511,000 | — | — | 1,511,000 | ||||||||
Unsecured senior notes | — | — | 28,000,000 | 28,000,000 | ||||||||
Operating lease obligations | 418,000 | 459,000 | — | 877,000 | ||||||||
TOTAL CONTRACTUAL CASH OBLIGATIONS | $ | 4,057,000 | $ | 6,649,000 | $ | 28,000,000 | $ | 38,706,000 | ||||
| (a) | Payments of these notes and capital lease obligations are shown as current since the subsidiary is unable to make the requirements due to a lack of cash flow. |
At the end of 2003, EXX had working capital of approximately $26,464,000 and a current ratio of 2.4 to 1. At the end of 2002, EXX had working capital of $12,117,000 and a current ratio of 3.9 to 1.
In January 2003, under the Newcor, Inc. Plan of Reorganization, EXX purchased 11,877 shares or 98.975% of the outstanding common stock of the reorganized Newcor for approximately $5,939,000. See Note 4 to the Consolidated Financial Statements for further discussion of this event.
EXX considers its cash and cash equivalents of $12,056,000 together with its Newcor subsidiary’s line of credit of $6,000,000 to be adequate for its current operating needs.
EXX has no present plans that will require material capital expenditures for any of EXX’s businesses. Capital expenditures are expected to be in the ordinary course of business and financed by cash generated from operations.
EXX believes the effects of inflation will not have a material effect on its future operations.
6
Critical Accounting Policies
We have prepared our financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America. This has required us to make estimates, judgments and assumptions that affected the amounts we reported. Note 1 of Notes to Consolidated Financial Statements contains the significant accounting principles that we used to prepare our consolidated financial statements.
We have identified a few critical accounting policies that required us to make assumptions about matters that were uncertain at the time of our estimates. Had we used different estimates and assumptions, the amounts we recorded could have been significantly different. Additionally, actual results that would have a material effect on our accounting policies that were affected by the estimates, assumptions, and judgments used in the preparation of our financial statements are listed below.
Inventories. Certain of our inventories are valued at the lower of cost, on the last-in, first-out (“LIFO”) method, or market. The remainder of our inventories is valued at the lower of cost, on the first-in, first-out (“FIFO”) method, or market. We periodically assess this inventory for obsolescence and potential excess by reducing the difference between our cost and the estimated market value of the inventory based on assumptions about future demand and historical sales patterns. If market conditions or future demand are less favorable than our current expectations, additional inventory write downs or reserves may be required, which could have an adverse effect on our reported results in the period the adjustments are made.
Income Taxes. We comply with SFAS No. 109, “Accounting for Income Taxes,” which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. SFAS 109 also requires a valuation allowance if it is more likely than not that a portion of the deferred tax asset will not be realized. We have determined that it is more likely than not that our future taxable income will be sufficient to realize our deferred tax assets.
Intangible Assets.Intangible Assets are being amortized over their estimated useful or economical lives and include provisions for patents, customer lists and customer relationships. Please see Footnote 2 for a further explanation.
| Item 8. | Financial Statements and Supplementary Data |
The financial statements and schedules required by this Item may be found beginning with the index page on page F-1 immediately following the signature page.
7
| Item 15. | Exhibits, Financial Statement Schedules and Reports on Form 8-K. |
(a) | 1. | Financial Statements | ||||||
| Independent Auditors’ Report | F-2 | |||||||
| Consolidated Balance Sheets | F-3 | |||||||
| Consolidated Statements of Operations | F-4 | |||||||
| Consolidated Statements of Changes in Stockholders’ Equity | F-5 | |||||||
| Consolidated Statements of Cash Flows | F-6–7 | |||||||
| 2. | Schedules to Financial Statements | |||||||
| II - Valuation and Qualifying Accounts | S-1 | |||||||
| 3. | Exhibits | |||||||
| Exhibit No. Description | ||||||||
2.1 | Agreement of Merger and Plan of Reorganization, EXX INC | (1) | ||||||
2.2 | Amendment to Agreement of Merger and Plan of Reorganization, EXX INC | (2) | ||||||
3.1 | Articles of Incorporation, EXX INC. | (1) | ||||||
4.1 | Newcor, Inc. Senior Increasing Rate Notes due 2013 Indenture. | (7) | ||||||
10.1 | Amendment dated March 27, 1998 to employment agreement with David A. Segal. * | (3) | ||||||
10.2 | Employment Agreement covering Newcor employment with David A. Segal dated September 3, 2001 * | (4) | ||||||
10.3 | Addendum to Employment Agreement covering Newcor employment with David A. Segal. * | (5) | ||||||
10.4 | Employment Agreement covering Newcor employment with James J. Connor dated August 9, 2000. * | (6) | ||||||
10.5 | Addendum to Employment Agreement covering Newcor employment with James J. Connor. * | (5) | ||||||
10.6 | Addendum to Change in Control Agreement covering Newcor employment with James J. Connor. * | (5) | ||||||
21 | List of Subsidiaries of EXX INC. | (8) | ||||||
31 | Certification of Chief Executive Officer and Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. | |||||||
32 | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |||||||
(1) Incorporated by reference to EXX INC Form S-4 Registration Statement dated July 25, 1994. | ||||||||
(2) Incorporated by reference to EXX INC Form S-4 Amendment No. 1 dated August 16, 1994. | ||||||||
(3) Incorporated by reference to EXX INC Form 10-K Report for the year ended December 31, 1997 filed March 31, 1998. | ||||||||
(4) Incorporated by reference to Newcor Inc. Form 10-Q Report dated September 30, 2001. | ||||||||
8
(5) Incorporated by reference to EXX INC Form 10-Q Report dated September 30, 2003. | ||||||||
(6) Incorporated by reference to Newcor, Inc. Form 10-K Report dated December 31, 2000. | ||||||||
(7) Incorporated by reference to EXX INC Form 10-Q Report dated June 30, 2003. | ||||||||
(8) Previously filed. | ||||||||
| * | Indicates a management contract or compensatory plan and arrangement. |
| (b) | Reports on Form 8-K |
On October 9, 2003, a Form 8-K was filed announcing the signing by a Newcor subsidiary of a new supply agreement with a major customer.
On October 15, 2003, a Form 8-K was filed announcing the completion of the sale of assets of Midwest Rubber and Plastic, Inc., a Newcor subsidiary.
On November 13, 2003, a Form 8-K was filed announcing the issuance of a press release for the financial results for the quarter and nine months ended September 30, 2003.
9
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 (Registrant) | ||
| By: | /s/ DAVID A. SEGAL | |
David A. Segal Chairman of the Board Chief Executive Officer Chief Financial Officer | ||
Date: April 13, 2005
10
EXX INC AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
SCHEDULE (ITEMS 8 AND 15 (d))
(1) Financial Statements | ||
| F-2 | ||
Consolidated Financial Statements | ||
| F-3 | ||
Statements of Operations Years Ended December 31, 2003, 2002 and 2001 | F-4 | |
Statements of Changes in Stockholders’ Equity Years Ended December 31, 2003, 2002 and 2001 | F-5 | |
Statements of Cash Flows Years Ended December 31, 2003, 2002 and 2001 | F-6 – 7 | |
| F-8 –28 | ||
(2) Financial Statement Schedule | ||
| S-1 | ||
OTHER SCHEDULES ARE OMITTED BECAUSE OF THE ABSENCE OF CONDITIONS UNDER WHICH THEY ARE REQUIRED OR BECAUSE THE REQUIRED INFORMATION IS GIVEN IN THE CONSOLIDATED FINANCIAL STATEMENTS OR NOTES THERETO.
F-1
To the Board of Directors and Stockholders of
EXX INC
We have audited the accompanying consolidated balance sheets of EXX INC and Subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 2003. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of EXX INC and Subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.
In connection with our audits of the financial statements referred to above, we audited the financial statement schedule listed in accompanying index. In our opinion, the financial statement schedule, when considered in relation to the financial statements taken as a whole, presents fairly, in all material respects, the information stated therein.
As discussed in Note 3 to the consolidated financial statements, management of the Company determined that an amortizable intangible asset had been omitted in the 2003 financial statements resulting in an understatement of amortization expense for the year ended December 31, 2003. Accordingly, the 2003 financial statements have been restated to give effect to this change.
/s/ ROTHSTEIN, KASS & COMPANY, P.C.
Roseland, New Jersey
March 13, 2004, except for Note 3, as to which the date is March 3, 2005
F-2
CONSOLIDATED BALANCE SHEETS
December 31, | 2003 | 2002 | ||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 12,056,000 | $ | 9,889,000 | ||||
Accounts receivable, less allowances of $180,000 and $119,000 in 2003 and 2002, respectively | 17,928,000 | 2,897,000 | ||||||
Inventories | 12,452,000 | 2,711,000 | ||||||
Other current assets | 1,711,000 | 304,000 | ||||||
Refundable income taxes | 196,000 | |||||||
Deferred tax asset | 1,511,000 | 564,000 | ||||||
Total current assets | 45,854,000 | 16,365,000 | ||||||
Property and equipment,net | 35,858,000 | 1,620,000 | ||||||
Other assets | ||||||||
Goodwill | 12,693,000 | |||||||
Intangible assets, net | 4,946,000 | |||||||
Other | 1,714,000 | 420,000 | ||||||
| 19,353,000 | 420,000 | |||||||
| $ | 101,065,000 | $ | 18,405,000 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Long-term debt, current portion | $ | 3,639,000 | $ | 73,000 | ||||
Accounts payable and other current liabilities | 15,751,000 | 3,859,000 | ||||||
Income taxes payable | 316,000 | |||||||
Total current liabilities | 19,390,000 | 4,248,000 | ||||||
Long-term liabilities | ||||||||
Long-term debt, less current portion | 34,207,000 | 1,481,000 | ||||||
Post-retirement benefits, other than pension | 3,406,000 | |||||||
Pension liability and other | 7,566,000 | 359,000 | ||||||
Deferred tax liability | 18,691,000 | 596,000 | ||||||
| 63,870,000 | 2,436,000 | |||||||
Minority Interest | 114,000 | |||||||
Commitments and contingencies | ||||||||
Stockholders’ equity | ||||||||
Preferred stock, $.01 par value, authorized 5,000,000 shares, none issued | ||||||||
Common stock, Class A, $.01 par value, authorized 25,000,000 shares, 12,061,607 shares issued | 121,000 | 121,000 | ||||||
Common stock, Class B, $.01 par value, authorized 1,000,000 shares, 874,693 and 624,693 shares issued, in 2003 and 2002 respectively | 9,000 | 6,000 | ||||||
Capital in excess of par value | 2,859,000 | 2,670,000 | ||||||
Accumulated other comprehensive loss | (276,000 | ) | (237,000 | ) | ||||
Retained earnings | 15,964,000 | 10,147,000 | ||||||
Less treasury stock, 1,649,300 of Class A common stock and 16,600 of Class B common stock, at cost | (986,000 | ) | (986,000 | ) | ||||
Total stockholders’ equity | 17,691,000 | 11,721,000 | ||||||
| $ | 101,065,000 | $ | 18,405,000 | |||||
See notes to consolidated financial statements.
F-3
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31, | 2003 | 2002 | 2001 | |||||||||
Net sales | $ | 135,474,000 | $ | 16,186,000 | $ | 18,382,000 | ||||||
Cost of sales | 110,348,000 | 10,933,000 | 11,564,000 | |||||||||
Gross profit | 25,126,000 | 5,253,000 | 6,818,000 | |||||||||
Selling, general and administrative expenses | 15,107,000 | 4,098,000 | 4,439,000 | |||||||||
Operating income | 10,019,000 | 1,155,000 | 2,379,000 | |||||||||
Other income (expenses) | ||||||||||||
Interest expense | (2,149,000 | ) | (144,000 | ) | (140,000 | ) | ||||||
Interest income | 30,000 | 139,000 | 366,000 | |||||||||
Other income | 206,000 | 79,000 | 68,000 | |||||||||
Minority interest in income of consolidated subsidiary | (53,000 | ) | ||||||||||
Equity in losses of Newcor, Inc. | (1,679,000 | ) | ||||||||||
| (1,966,000 | ) | 74,000 | (1,385,000 | ) | ||||||||
Income from continuing operations before income taxes | 8,053,000 | 1,229,000 | 994,000 | |||||||||
Income taxes | 2,812,000 | 393,000 | 913,000 | |||||||||
Income from continuing operations | 5,241,000 | 836,000 | 81,000 | |||||||||
Discontinued operations: | ||||||||||||
Income from discontinued operations of subsidiary, net of income taxes of $296,000 | 576,000 | |||||||||||
Net income | $ | 5,817,000 | $ | 836,000 | $ | 81,000 | ||||||
Basic net income per common share: | ||||||||||||
Income from continuing operations | $ | 0.47 | $ | 0.07 | $ | 0.01 | ||||||
Income from discontinued operations | 0.05 | |||||||||||
Net income | $ | 0.52 | $ | 0.07 | $ | 0.01 | ||||||
Assuming dilution net income per common share: | ||||||||||||
Income from continuing operations | $ | 0.43 | $ | 0.07 | $ | 0.01 | ||||||
Income from discontinued operations | 0.05 | |||||||||||
Net income | $ | 0.48 | $ | 0.07 | $ | 0.01 | ||||||
Weighted average shares outstanding | ||||||||||||
Basic | 11,192,000 | 11,230,000 | 11,939,000 | |||||||||
Diluted | 12,253,000 | 11,276,000 | 11,994,000 | |||||||||
See notes to consolidated financial statements.
F-4
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
| Common Stock | Capital in Excess of Par Value | Comprehensive Income (Loss) | Accumulated Other Comprehensive Income (Loss) | Retained Earnings | Treasury Stock | Total | ||||||||||||||||||||||
Years Ended December 31, 2003, 2002 and 2001 | Class A | Class B | ||||||||||||||||||||||||||
Balances, January 1, 2001 | $ | 121,000 | $ | 6,000 | $ | 2,670,000 | $ | (312,000 | ) | $ | 9,230,000 | $ | (288,000 | ) | $ | 11,427,000 | ||||||||||||
Purchase of treasury stock | (495,000 | ) | (495,000 | ) | ||||||||||||||||||||||||
Net income | $ | 81,000 | 81,000 | 81,000 | ||||||||||||||||||||||||
Other comprehensive income, net of tax effect | ||||||||||||||||||||||||||||
Minimum pension liability adjustment | 37,000 | (a) | 37,000 | 37,000 | ||||||||||||||||||||||||
Total comprehensive income | $ | 118,000 | ||||||||||||||||||||||||||
Balances, December 31, 2001 | 121,000 | 6,000 | 2,670,000 | (275,000 | ) | 9,311,000 | (783,000 | ) | 11,050,000 | |||||||||||||||||||
Purchase of treasury stock | (203,000 | ) | (203,000 | ) | ||||||||||||||||||||||||
Net income | $ | 836,000 | 836,000 | 836,000 | ||||||||||||||||||||||||
Other comprehensive income, net of tax effect | ||||||||||||||||||||||||||||
Minimum pension liability adjustment | �� | 38,000 | (a) | 38,000 | 38,000 | |||||||||||||||||||||||
Total comprehensive income | $ | 874,000 | ||||||||||||||||||||||||||
Balances, December 31, 2002 | 121,000 | 6,000 | 2,670,000 | (237,000 | ) | 10,147,000 | (986,000 | ) | 11,721,000 | |||||||||||||||||||
Stock-based compensation issued to chief executive officer | 3,000 | 189,000 | 192,000 | |||||||||||||||||||||||||
Net income | $ | 5,817,000 | 5,817,000 | 5,817,000 | ||||||||||||||||||||||||
Other comprehensive income, net of tax effect | ||||||||||||||||||||||||||||
Minimum pension liability adjustment | (39,000 | )(a) | (39,000 | ) | (39,000 | ) | ||||||||||||||||||||||
Total comprehensive income | $ | 5,778,000 | ||||||||||||||||||||||||||
Balances, December 31, 2003 | $ | 121,000 | $ | 9,000 | $ | 2,859,000 | $ | (276,000 | ) | $ | 15,964,000 | $ | (986,000 | ) | $ | 17,691,000 | ||||||||||||
| (a) | Minimum pension liability adjustment has been recorded net of tax effects of ($20,000), $19,000, and $19,000, respectively, in 2003, 2002 and 2001. |
See notes to consolidated financial statements.
F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, | 2003 | 2002 | 2001 | |||||||||
| Cash flows from operating activities | ||||||||||||
Net income | $ | 5,817,000 | $ | 836,000 | $ | 81,000 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
Depreciation and amortization | 7,408,000 | 210,000 | 248,000 | |||||||||
Deferred income taxes | 2,248,000 | (29,000 | ) | 112,000 | ||||||||
Common stock issued as compensation | 192,000 | |||||||||||
Minority interest in income of consolidated subsidiary | 53,000 | |||||||||||
Equity in losses of Newcor, Inc. | 1,679,000 | |||||||||||
Loss on abandonment of property and equipment | 40,000 | |||||||||||
Increase (decrease) in cash and cash equivalents attributable to changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | 3,884,000 | (320,000 | ) | 711,000 | ||||||||
Inventories | 89,000 | (91,000 | ) | 375,000 | ||||||||
Other current assets | 854,000 | (58,000 | ) | 110,000 | ||||||||
Refundable income taxes | (196,000 | ) | 21,000 | 131,000 | ||||||||
Other assets | (609,000 | ) | 62,000 | (88,000 | ) | |||||||
Accounts payable and other current liabilities | (5,325,000 | ) | (381,000 | ) | 158,000 | |||||||
Income taxes payable | (316,000 | ) | 316,000 | |||||||||
Post retirement and pension payments | (2,416,000 | ) | ||||||||||
Net cash provided by operating activities | 11,723,000 | 566,000 | 3,517,000 | |||||||||
Cash flows from investing activities | ||||||||||||
Purchases of property and equipment | (5,228,000 | ) | (29,000 | ) | (24,000 | ) | ||||||
Proceeds from sale of discontinued operations | 2,550,000 | |||||||||||
Excess of cash acquired net of cash expended in acquisition of Newcor, Inc. | 935,000 | |||||||||||
Proceeds from maturities of short-term investments | 600,000 | |||||||||||
Purchase of investments in Newcor, Inc. | (1,679,000 | ) | ||||||||||
Net cash used in investing activities | (1,743,000 | ) | (29,000 | ) | (1,103,000 | ) | ||||||
Cash flows from financing activities | ||||||||||||
Payments on long-term debt | (10,462,000 | ) | (67,000 | ) | (69,000 | ) | ||||||
Proceeds from equipment financing and term loans | 2,588,000 | |||||||||||
Investment in subsidiary by minority shareholders | 61,000 | |||||||||||
Purchase of treasury stock | (203,000 | ) | (495,000 | ) | ||||||||
Net cash used in financing activities | (7,813,000 | ) | (270,000 | ) | (564,000 | ) | ||||||
Net increase in cash and cash equivalents | 2,167,000 | 267,000 | 1,850,000 | |||||||||
Cash and cash equivalents,beginning of year | 9,889,000 | 9,622,000 | 7,772,000 | |||||||||
Cash and cash equivalents,end of year | $ | 12,056,000 | $ | 9,889,000 | $ | 9,622,000 | ||||||
See notes to consolidated financial statements.
F-6
EXX INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
Years Ended December 31, | 2003 | 2002 | 2001 | ||||||
Supplemental disclosures of cash flow information, cash paid during the year for: | |||||||||
Interest | $ | 1,444,000 | $ | 143,000 | $ | 85,000 | |||
Income taxes | $ | 2,202,000 | $ | 85,000 | $ | 670,000 | |||
Supplemental disclosure of noncash investing and financing activity, discontinued operations sold for a note receivable | $ | 250,000 | $ | — | $ | — | |||
See notes to consolidated financial statements.
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 1. | Nature of operations |
EXX INC and Subsidiaries (collectively the “Company”) operate primarily in the mechanical equipment industry and the plastics and rubber industry. The Company’s operations primarily involve the design and manufacturing of precision machined components and assemblies and custom rubber and plastic products primarily for the automotive and agricultural vehicle markets. Operations in the mechanical equipment industry also involve the design, assembly and sale of capital goods, such as electric motors and cable pressurization equipment. Operations in the plastics and rubber industry also include the importation and sale of impulse toys. The Company’s mechanical equipment products are incorporated into customers’ products or are used to maintain customers’ equipment.
| 2. | Summary of significant accounting policies |
Principles of Consolidation
The consolidated financial statements include the accounts of EXX INC and its wholly owned and majority owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.
Revenue Recognition
The Company recognizes revenues when goods are shipped and title passes to customers. Provisions are established, as appropriate, for uncollectible accounts, returns and allowances and warranties in connection with sales.
One subsidiary of the Company records profit or losses on its contracts to build mechanical equipment on the completed contract method. Under that method, billings (including estimates of amounts billable for work already performed) and costs are accumulated during period of fabrication, but no profits are recorded before completion of the mechanical equipment.
Cash and Cash Equivalents
The Company considers all highly-liquid debt instruments purchased with maturities of three months or less to be cash equivalents. As of December 31, 2003, and at various times during the year, balances of cash at financial institutions exceeded the federally insured limit. The Company has not experienced any losses in such accounts and believes it is not subject to any significant credit risk on cash and cash equivalents.
Accounts Receivable
The Company carries its accounts receivable at cost less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts, based on a history of past write-offs and collections and current credit conditions. Accounts are written off as uncollectible if payments are not expected to be received.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities which qualify as financial instruments under Statement of Financial Accounting Standards (“SFAS”) No. 107, “Disclosures About Fair Value of Financial Instruments,” approximate the carrying amounts presented in the accompanying consolidated balance sheets.
F-8
EXX INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 2. | Summary of significant accounting policies (continued) |
Inventories
Certain inventories are valued at the lower of cost, on the last-in, first-out (“LIFO”) method, or market. The remainder of the inventories are valued at the lower of cost, on the first-in, first-out (“FIFO”) method, or market.
Impairment of Long-Lived Assets
The Company periodically assesses the recoverability of the carrying amounts of long-lived assets. A loss is recognized when expected undiscounted future cash flows are less than the carrying amount of the asset. The impairment loss is the difference by which the carrying amount of the asset exceeds its fair value.
Property and Equipment
Property and equipment are stated at cost and are depreciated or amortized on the straight-line method over the estimated useful lives of the assets as follows:
Buildings and improvements | 15 - 25 years | |
Machinery and equipment | 3 - 20 years |
Maintenance and repairs are charged to operations, while betterments and improvements are capitalized.
Advertising
Advertising costs are charged to operations as incurred and were $75,000, $29,000 and $59,000 for 2003, 2002 and 2001, respectively.
Research and Development Costs
Expenditures for research and development are charged to operations as incurred and were $233,000, $280,000 and $193,000 for 2003, 2002 and 2001, respectively.
Goodwill
In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill is not amortized but as required, the Company performs annual testing for impairment (comparison of estimated fair value to carrying value). Several factors are used to evaluate the recoverability of goodwill, including management’s plans for future operations, recent operating results and each division’s projected undiscounted cash flows.
Intangible Assets
Intangible assets are being amortized over their estimated useful or economic lives using the straight-line method as follows:
Patents | 10 years | |
Customer lists | 3 years | |
Customer relationships | 5 years |
F-9
EXX INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 2. | Summary of significant accounting policies (continued) |
Income Taxes
The Company complies with SFAS No. 109, “Accounting for Income Taxes”, which requires an asset and liability approach to financial reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Income tax benefits recognized from the deduction of goodwill are used to reduce the carrying value of goodwill in the financial statements as they are realized. Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amount expected to be realized.
Income Per Common Share
SFAS No. 128, “Earnings Per Share”, requires dual presentation of basic and diluted income per share for all periods presented. Basic income per share excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income of the Company.
Unexercised stock options to purchase 2,150,000 shares of the Company’s Class A Common Stock as of December 31, 2002 and 2001, respectively, were not included in the computation of diluted earnings per share because the options’ exercise prices were greater than the average market price of the Company’s Class A Common Stock.
Stock-Based Compensation
The Company follows SFAS No. 123 “Accounting for Stock-Based Compensation.” The provisions of SFAS No. 123 allow companies to either expense the estimated fair value of stock options or to continue to follow the intrinsic value method set forth in APB Opinion 25, “Accounting for Stock Issued to Employees” (“APB 25”) but disclose the pro forma effect on net income (loss) had the fair value of the options been expensed. The Company has elected to continue to apply APB 25 in accounting for its stock option incentive plans.
F-10
EXX INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 2. | Summary of significant accounting policies (continued) |
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Reclassification
Certain 2002 and 2001 amounts have been reclassified to conform to the 2003 presentation.
| 3. | Acquisition of Newcor, Inc. |
In July 2001, the Company purchased an additional 679,994 shares of Newcor Inc. (“Newcor”) common stock and $500,000 principal amount of Newcor’s 9.875% Senior Subordinated Notes due 2008, from five of the former directors of Newcor and 24,000 shares from David A. Segal (the Company’s Chairman). In connection with such purchases, the Company paid an aggregate of $1,679,000 in cash. Prior to the Company’s acquisition of these additional shares, the Company accounted for its investment in Newcor as an available for sale marketable security. The changes in the market value of the Newcor shares were recorded as comprehensive income in each applicable period. The additional acquisition increased the Company’s ownership percentage in Newcor to approximately 31%, thereby requiring the Company to use the equity method of accounting for this investment in accordance with Accounting Principles Board Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock.” As of December 31, 2002, the Company owned approximately 1,546,000 shares of the outstanding common stock of Newcor and based on its equity in the losses of Newcor, the Company reduced its investment (including subordinated notes) in Newcor to zero. In February 2002, Newcor filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Act. As a result of the reorganization plan approved by the creditors, these shares were of no value at December 31, 2002 and were effectively cancelled via the reorganization.
On January 31, 2003, the Plan of Reorganization of Newcor became effective and under a rights offering to stockholders, the Company purchased 11,877 shares of common stock of Newcor for a total purchase price of $5,939,000. The shares purchased by the Company constitute 98.975% of the outstanding common stock of the reorganized Newcor entity and, as a result, Newcor ceased to be a stand-alone public reporting company and became a consolidated subsidiary of the Company. The purchase price was established in the Plan of Reorganization, as approved by the creditors, the United States Trustee for the District of Delaware and the United States Bankruptcy Court for the District of Delaware. The source of funds for the Company’s purchase was cash on hand. In addition to the purchase made by the Company, certain former stockholders of Newcor, purchased shares of common stock of Newcor under the rights offering. The former stockholders purchased an aggregate of 123 shares totaling $61,000 which represented 1.025%, of the aggregate purchase price and are accounted for as a minority interest in the Company’s consolidated financial statements. The primary purpose of the acquisition of Newcor was to expand the Company’s operations. Newcor designs and manufactures precision machine components and assemblies, machine tools and custom rubber and plastic products primarily for the automotive and agricultural vehicle markets. Newcor is also a supplier of standard and specialty machines and equipment systems principally for the automotive and appliance industries.
F-11
EXX INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 3. | Acquisition of Newcor, Inc. (continued) |
The following condensed balance sheet reflects the assets and liabilities of Newcor at their fair market values at January 31, 2003.
Current assets | $ | 38,274,000 | |
Property and equipment | 38,027,000 | ||
Intangibles and other assets | 20,871,000 | ||
Total assets | $ | 97,172,000 | |
Current liabilities | $ | 21,168,000 | |
Long-term debt | 40,215,000 | ||
Pension, post retirement and other liabilities | 12,970,000 | ||
Deferred tax liabilities | 16,819,000 | ||
Total liabilities | $ | 91,172,000 | |
Intangible assets include goodwill of approximately $14,592,000 and approximately $5,920,000 allocated to customer lists, customer relationships and patents which will be amortized over periods ranging from 3 to 10 years. Goodwill was reduced by $1,899,000 to give effect to the tax benefit derived from the amortization of goodwill for income tax purposes for the year ended December 31, 2003.
In March 2005 the Company’s management reviewed the allocation of purchase price to Newcor’s assets and determined that an additional intangible asset of $3,635,000 relating to customer relationships existed at the purchase date which had not been previously recorded. The intangible asset will be amortized over a five year period commencing with the date of purchase. The consolidated financial statements as of December 31, 2003 and for the year then ended have been restated to give affect to this adjustment. The restatement resulted in the adjustment to the amounts previously reported, as follows.
| a) | Goodwill was decreased by $2,248,000. |
| b) | Intangible assets were increased by $2,960,000 net of accumulated amortization of $665,000. |
| c) | Deferred tax liability was increased by $1,124,000. |
| d) | Minority interest decreased by $5,000. |
| e) | Income from continuing operations, net income and retained earnings were reduced by $407,000 or by $.04 per basic share and $.03 per diluted share to give effect to eleven months of amortization net of tax effect. |
F-12
EXX INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 3. | Acquisition of Newcor, Inc. (continued) |
Newcor’s operations have been included in the consolidated financial statements of the Company commencing January 31, 2003. The following reflects the pro forma results for the years ended December 31, 2003 and 2002 as if the acquisition of Newcor occurred on January 1, 2002.
| Year Ended December 31, | ||||||
| 2003 | 2002 | |||||
Revenue | $ | 146,486,000 | $ | 172,880,000 | ||
Income from continuing operations | 5,262,000 | 7,465,000 | ||||
Earnings per share | ||||||
Basic | .47 | .66 | ||||
Diluted | .43 | .66 | ||||
This information is not necessarily indicative of the actual results had the acquisition of Newcor occurred on January 1, 2002.
| 4. | Discontinued operations |
In September 2003, the Company completed the sale of the net assets of one of Newcor’s subsidiaries, formerly a part of the Plastics and Rubber segment, for a selling price of $2,800,000 of which $2,550,000 was received in cash at closing, with the balance due in the form of a $250,000 interest bearing note. Since the net assets of the subsidiary were recorded at their fair market value as a result of purchase accounting adjustments, no gain was recognized on the sale. The net sales and pretax income of the subsidiary for the year ended December 31, 2003 prior to the disposition date were $8,024,000 and $872,000, respectively.
| 5. | Inventories |
Inventories consist of the following at December 31, 2003 and 2002:
| 2003 | 2002 | |||||
Raw materials | $ | 6,208,000 | $ | 737,000 | ||
Work-in-progress | 2,652,000 | 152,000 | ||||
Finished goods | 3,592,000 | 1,822,000 | ||||
| $ | 12,452,000 | $ | 2,711,000 | |||
Inventories stated on the LIFO method amounted to $247,000 and $316,000 at December 31, 2003 and 2002, respectively, which amounts are below replacement cost by approximately $357,000 and $391,000, respectively.
During 2003, 2002, and 2001, net income was not materially affected as a result of using the LIFO method.
F-13
EXX INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 6. | Property and equipment |
Property and equipment consists of the following at December 31, 2003 and 2002:
| 2003 | 2002 | |||||
Land | $ | 1,622,000 | $ | 41,000 | ||
Buildings and improvements, including $1,614,000 under a capital lease | 13,642,000 | 2,993,000 | ||||
Machinery and equipment | 34,473,000 | 6,491,000 | ||||
| 49,737,000 | 9,525,000 | |||||
Less accumulated depreciation and amortization, including $668,000 and $614,000 under a capital lease in 2003 and 2002, respectively | 13,879,000 | 7,905,000 | ||||
| $ | 35,858,000 | $ | 1,620,000 | |||
| 7. | Intangible assets |
Intangible assets at December 31, 2003 are summarized as follows:
| Gross Carrying Amount | Accumulated Amortization | Net | |||||||
Patents | $ | 1,795,000 | $ | 155,000 | $ | 1,640,000 | |||
Customer lists | 500,000 | 154,000 | 346,000 | ||||||
Customer relationships | 3,625,000 | 665,000 | 2,960,000 | ||||||
| $ | 5,920,000 | $ | 974,000 | $ | 4,946,000 | ||||
Amortization expense for the year ended December 31, 2003 was $974,000.
Estimated amortization expense for the five years subsequent to December 31, 2003 is as follows:
Year ending December 31, | |||
2004 | $ | 1,065,000 | |
2005 | 1,065,000 | ||
2006 | 908,000 | ||
2007 | 897,000 | ||
2008 | 232,000 | ||
F-14
EXX INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 8. | Long-term debt |
Long-term debt at December 31, 2003 and 2002 is comprised of the following:
| 2003 | 2002 | |||||||
Term note with monthly payments of approximately $82,217 plus interest of prime (4% at December 31, 2003) plus .75% per annum through January 2006, collateralized by substantially all of the assets of various subsidiaries | (a) | $ | 3,911,000 | $ | — | |||
Promissory notes with monthly payments of approximately $115,000, including interest at various rates ranging from 6.25% - 8.5%, collateralized by certain equipment of Newcor and its subsidiaries | 4,407,000 | |||||||
Unsecured senior notes | (b) | 28,000,000 | ||||||
Note payable with monthly payments of approximately $4,000, including interest at 4% per annum, through September 2015, collateralized by substantially all of the assets of a subsidiary | (c) | 398,000 | 400,000 | |||||
Note payable with monthly payments of approximately $2,000, including interest at 4% per annum, through December 2023, collateralized by substantially all of the assets of a subsidiary | (c) | 371,000 | 371,000 | |||||
Capital lease obligation of a subsidiary | (c) | 759,000 | 783,000 | |||||
| 37,846,000 | 1,554,000 | |||||||
Less current portion | 3,639,000 | 73,000 | ||||||
| $ | 34,207,000 | $ | 1,481,000 | |||||
Future aggregate required principal payments for each of the next five years are as follows:
Year ending December 31, | |||
2004 | $ | 3,639,000 | |
2005 | 2,054,000 | ||
2006 | 1,957,000 | ||
2007 | 1,804,000 | ||
2008 | 359,000 | ||
F-15
EXX INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 8. | Long-term debt (continued) |
| (a) | As of January 31, 2003, Newcor and its subsidiaries entered into a three-year credit facility of approximately $23,000,000 with a financial institution which included a revolving credit line and the term note (the “Credit Agreement”). The revolver borrowing availability was based on a percentage of accounts receivable and inventory balances less certain reserves as specified in the Credit Agreement. Interest on the borrowings was .75% over the prime-lending rate. The prime rate at December 31, 2003 was 4.0%. To the extent that the borrower had cash on hand with the financial institution, interest on the borrowings was not incurred. The term loan required payments based on a five-year amortization period with a balloon payment due upon termination of the facility on January 31, 2006. At December 31, 2003, there was no balance outstanding on the revolving credit line. |
On February 22, 2004, the Credit Agreement was terminated by Newcor and a new bank facility (the “2004 Credit Agreement”) was entered into with National City Bank. The 2004 Credit Agreement allows for $6,000,000 of available borrowings with reducing availability based upon an equal monthly amortization over three years, secured by the machinery and equipment owned by Newcor and its subsidiaries, except the machinery and equipment securing the $4,407,000 of equipment notes.
| (b) | Newcor and its subsidiaries entered into an agreement with various unsecured debtors as a result of the Plan of Reorganization (the “Unsecured Notes”). The Unsecured Notes bear interest at 6% in the first 5 years and 7% in the last five years of these ten-year notes. Annual amortization is based on excess cash flow as defined in the indenture but is generally calculated as earnings before income taxes plus depreciation and amortization less capital expenditures up to a maximum of $5,000,000, less cash paid for taxes, less term debt reductions. The balance remaining after amortization based on the excess cash flow is due upon maturity of the notes on January 31, 2013. No principal payment was required on the Unsecured Notes for the year ended December 31, 2003. |
| (c) | At December 31, 2003, these notes and the capital lease obligation were in default and accordingly have been classified as currently due. |
| 9. | Accounts payable and other current liabilities |
| 2003 | 2002 | |||||
Trade accounts payable | $ | 5,871,000 | $ | 578,000 | ||
Warranty | 340,000 | 444,000 | ||||
Payroll and related costs | 3,940,000 | 987,000 | ||||
Progress billings | 1,433,000 | |||||
Commissions payable | 377,000 | 298,000 | ||||
Refundable purchase discounts | 645,000 | 535,000 | ||||
Other | 3,145,000 | 1,017,000 | ||||
| $ | 15,751,000 | $ | 3,859,000 | |||
F-16
EXX INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 10. | Income taxes |
The provision for income taxes consists of the following:
| 2003 | 2002 | 2001 | ||||||||
Current | ||||||||||
Federal | $ | 262,000 | $ | 401,000 | $ | 800,000 | ||||
State | 302,000 | 21,000 | ||||||||
| 564,000 | 422,000 | 800,000 | ||||||||
Deferred | ||||||||||
Federal | 2,248,000 | (29,000 | ) | 113,000 | ||||||
| $ | 2,812,000 | $ | 393,000 | $ | 913,000 | |||||
For the years ended December 31, 2002 and 2001, substantially all of the Company’s taxable income was generated in states with no state or local income taxes.
The following reconciles the Federal statutory tax rate to the effective income tax rate:
| 2003 | 2002 | 2001 | ||||||
| % | % | % | ||||||
Federal statutory rate | 34.0 | 34.0 | 34.0 | |||||
State, net of federal tax | 3.4 | 1.0 | ||||||
Change in valuation allowance | 57.4 | |||||||
Other | (2.5 | ) | (3.1 | ) | 0.5 | |||
Effective income tax rate | 34.9 | 31.9 | 91.9 | |||||
F-17
EXX INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 10. | Income taxes (continued) |
| 2003 | 2002 | |||||||
Deferred tax assets | ||||||||
Allowance for doubtful accounts, warranty | ||||||||
and notes receivable | $ | 268,000 | $ | 438,000 | ||||
Equity in loss of Newcor | 1,068,000 | 1,068,000 | ||||||
Inventories | 215,000 | 78,000 | ||||||
Pension and post retirement obligations | 3,591,000 | |||||||
Accrued liabilities and other | 1,028,000 | 48,000 | ||||||
| 6,170,000 | 1,632,000 | |||||||
Valuation allowance | (1,068,000 | ) | (1,068,000 | ) | ||||
| $ | 5,102,000 | $ | 564,000 | |||||
Deferred tax liabilities | ||||||||
Accumulated DISC earnings | $ | (536,000 | ) | $ | (509,000 | ) | ||
Property and equipment | (4,230,000 | ) | ||||||
Pension obligations | (19,000 | ) | ||||||
Intangible assets | (1,445,000 | ) | ||||||
Investment in subsidiaries | (15,873,000 | ) | ||||||
Other | (198,000 | ) | (68,000 | ) | ||||
| (22,282,000 | ) | (596,000 | ) | |||||
Deferred tax asset (liability),net | $ | (17,180,000 | ) | $ | (32,000 | ) | ||
The amounts are recorded in the consolidated balance sheets as follows:
| 2003 | 2002 | |||||||
Deferred tax asset, current | $ | 1,511,000 | $ | 564,000 | ||||
Deferred tax liability | (18,691,000 | ) | (596,000 | ) | ||||
| $ | (17,180,000 | ) | $ | (32,000 | ) | |||
F-18
EXX INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 11. | Pension plans and post retirement benefits, other than pensions |
The Company provides retirement benefits for certain employees under several defined benefit pension plans. Benefits from these plans are based on compensation, years of service and either fixed dollar amounts per years of service or employee compensation during the later years of employment. The assets of the pension plans consist principally of cash equivalents, corporate and government bonds, and common and preferred stocks.
The Company’s funding policy is to contribute annually at least the minimum amount required by the Employee Retirement Income Security Act of 1974. Effective January 1, 1988 one of the plans was curtailed through an amendment to freeze benefits and future participation. Effective December 31, 2003 most of the benefits under the largest plan were curtailed through an amendment to freeze benefits and future participation for most employees.
Net periodic pension cost for the Company-sponsored plans is as follows:
| 2003 | 2002 | 2001 | ||||||||||
Service cost | $ | 905,000 | $ | 69,000 | $ | 71,000 | ||||||
Interest cost | 2,499,000 | |||||||||||
Expected return on plan assets | (2,645,000 | ) | (81,000 | ) | (69,000 | ) | ||||||
Amortization of unrecognized prior service cost | 250,000 | |||||||||||
Amortization of unrecognized losses/(gains) | 321,000 | 21,000 | 29,000 | |||||||||
Net periodic pension cost | $ | 1,330,000 | $ | 9,000 | $ | 31,000 | ||||||
The following table sets forth the changes in benefit obligations for the years ended December 31, 2003 and 2002 for the Company-sponsored defined benefit pension plans:
| 2003 | 2002 | |||||||
Projected benefit obligation beginning of the year | $ | 1,024,000 | $ | 1,069,000 | ||||
Projected benefit obligation assumed from | ||||||||
Newcor acquisition | 38,059,000 | |||||||
Service cost | 905,000 | |||||||
Interest cost | 2,499,000 | 69,000 | ||||||
Amendments | 199,000 | |||||||
Actuarial (gain) loss | 191,000 | (32,000 | ) | |||||
Benefits paid | (2,308,000 | ) | (82,000 | ) | ||||
| $ | 40,569,000 | $ | 1,024,000 | |||||
F-19
EXX INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 11. | Pension plans and post retirement benefits, other than pensions (continued) |
The following table sets forth the change in plan assets for the years ended December 31, 2003 and 2002 for the Company-sponsored defined benefit pension plans:
| 2003 | 2002 | |||||||
Fair value of plan assets at prior measurement date | $ | 1,085,000 | $ | 1,052,000 | ||||
Fair value of plan assets acquired from Newcor acquisition | 28,322,000 | |||||||
Actual return on plan assets | 2,178,000 | 85,000 | ||||||
Interest | 2,557,000 | |||||||
Employer contributions | 2,802,000 | 30,000 | ||||||
Benefits paid | (2,308,000 | ) | (82,000 | ) | ||||
Fair value of plan assets at prior measurement date | $ | 34,636,000 | $ | 1,085,000 | ||||
| 2003 | 2002 | |||||||
Funded status | $ | (5,923,000 | ) | $ | 61,000 | |||
Unrecognized net actuarial loss (gain) | (1,230,000 | ) | ||||||
Net amount recognized | $ | (7,153,000 | ) | $ | 61,000 | |||
The funded status for the years ended December 31, 2003 and 2002 is as follows:
Amounts recognized in the consolidated balance sheets consist of the following: |
| |||||||
| 2003 | 2002 | |||||||
Prepaid benefit cost | $ | 413,000 | $ | 420,000 | ||||
Accrued benefit cost | (7,566,000 | ) | (359,000 | ) | ||||
Net amount recognized | $ | (7,153,000 | ) | $ | 61,000 | |||
F-20
EXX INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 11. | Pension plans and post retirement benefits, other than pensions (continued) |
Weighted average assumptions used to determine benefit obligations for the years ended December 31, 2003, 2002 and 2001:
| 2003 | 2002 | 2001 | |||||||
Discount rate | 6.25 | % | 7 | % | 7 | % | |||
Rate of compensation increase | 2 | % | 0 | % | 0 | % |
Weighted average assumptions used to determine net periodic benefit cost for the years ended December 31, 2003, 2002 and 2001:
| 2003 | 2002 | 2001 | |||||||
Discount rate | 6.75 | % | 7 | % | 7 | % | |||
Expected long-term rate of return on plan assets | 9 | % | 8 | % | 8 | % | |||
Rate of compensation increase | 2 | % | 0 | % | 0 | % |
The accumulated benefit obligation for all defined benefit pension plans was $40,189,000 and $1,025,000 at December 31, 2003 and 2002, respectively.
The weighted average asset allocations of the Company’s pension plans at December 31, 2003 and 2002 are as follows:
| 2003 | 2002 | |||||
Debt Securities | 38.0 | % | 2 | % | ||
Equity Securities | 59.4 | % | 5 | % | ||
Annuities and other | 2.6 | % | 93 | % | ||
| 100 | % | 100 | % | |||
The Company expects to contribute $652,000 to its pension plans during the year ended December 31, 2004.
Newcor is obligated to provide health care and life insurance benefits to certain eligible retired employees. However, all post retirement benefits, other than pensions, were discontinued for all employees who retired after January 1, 1993. This plan obligation is unfunded but the accumulated post retirement benefit obligation, as actuarially determined, has been fully accrued for in the accompanying consolidated balance sheets. The medical plan pays a stated percentage of most medical expenses, reduced for any deductible and payments made by government programs or other group coverage. The cost of providing these benefits is shared with the retirees. The cost sharing arrangements limit Newcor’s future retiree medical cost increases to the rate of inflation, as measured by the Consumer Price index.
F-21
EXX INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 12. | Stock options |
During 1994, the Company’s Board of Directors adopted, and the stockholders approved, the 1994 stock option plan (the Plan) pursuant to which 5,000,000 shares of Class A common stock were reserved for issuance upon the exercise of options granted to officers, directors, employees and consultants of the Company. Options under the Plan may be incentive stock options, nonqualified stock options, or any combination thereof, and the Board of Directors (Committee) may grant options at an exercise price which is not less than the fair market value on the date such options are granted. The Plan further provides that the maximum period in which stock options may be exercised will be determined by the Committee, except that they may not be exercisable after ten years from the date of grant. Unless previously terminated, the Plan shall terminate in October 2004. At December 31, 2003 and 2002, options to purchase 5,000,000 shares of Class A common stock were available for grant under the Plan.
The status of the Company’s stock options are summarized below:
| Options | Per Share Price | Weighted Average Exercise Price | |||||||
Outstanding and exercisable at December 31, 2002, 2001 and 2000 | 2,250,000 | (a) | $ | 0.65 - $1.00 | $ | 0.74 | |||
Options expired in 2003 | (2,250,000 | ) | $ | 0.65 - $1.00 | $ | 0.74 | |||
Options issued in 2003 | 2,000,000 | (b) | $ | 0.89 - $1.15 | $ | 0.90 | |||
Outstanding and exercisable at December 31, 2003 | 2,000,000 | $ | 0.89 - $1.15 | $ | 0.90 | ||||
| (a) | Includes options to purchase 2,150,000 shares of Class A common stock and 100,000 shares of Class B common stock. |
| (b) | Includes options to purchase 1,900,000 shares of Class A common stock and 100,000 shares of Class B common stock, exercisable at grant date and expire in 2013. |
In addition to the options issued as a performance award to the CEO in (b) above in 2003, the Board of Directors approved and the shareholders ratified the issuance of 250,000 shares of Class B common stock to the CEO. The Company recorded compensation expense of $192,000 for these shares in the year ended December 31, 2003.
The Company used the Black-Scholes option-pricing model to determine the fair value of grants made in 2003. The following assumptions were applied in determining the pro forma compensation cost:
| 2003 | ||
Risk-free interest rate | 3.56% | |
Expected option term | 5 years | |
Expected price volatility | 56% - 85% | |
Dividend yield | — |
F-22
EXX INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 12. | Stock options (continued) |
Had compensation cost for the Company’s stock option grant been determined based on the fair value, at the grant or issue date, in 2003 and, consistent with the provisions of SFAS No. 123, the Company’s net income and income per share would have been reduced to the pro forma amounts indicated below:
Net income, as reported | $ | 5,817,000 | ||
Deduct: total stock-based compensation expense under fair value method for awards, net of related tax effect | (629,000 | ) | ||
Net income, pro forma | $ | 5,188,000 | ||
Earnings per share: | ||||
Basic net income per share as reported | $ | 0.52 | ||
Diluted net income per share as reported | $ | 0.48 | ||
Basic net income per share pro forma | $ | 0.46 | ||
Diluted net income per share as pro forma | $ | 0.42 | ||
| 13. | Commitments and contingencies |
Leases
The Company leases certain office and plant facilities under a non-cancellable operating lease expiring in February 2006.
Future minimum lease payments under this lease is as follows:
Fiscal year ending, | |||
2004 | $ | 418,000 | |
2005 | 418,000 | ||
2006 | 41,000 | ||
Rent expense for 2003, 2002 and 2001 amounted to $395,000, $78,000 and $77,000, respectively.
Employment Agreement
The Company and its subsidiaries have employment agreements with two officers, one of whom is a principal stockholder, for minimum annual salaries totaling $1,050,000, adjusted annually for increases in the Consumer Price Index, plus bonuses based on the Company’s earnings. The agreements expire at various dates through 2011.
Litigation
The Company is a party to various legal matters, the outcome of which, in the opinion of management, will not have a material adverse effect on the financial position, results of operations or cash flows of the Company.
F-23
EXX INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 14. | Segment information |
The Company adopted Statement of Financial Accounting Standards No. 131 (SFAS No. 131), “Disclosures about Segments of an Enterprise and Related Information”. SFAS No. 131 requires disclosures of segment information on the basis that is used internally for evaluating segment performance and deciding how to allocate resources to segments.
Management has identified two reportable business segments based on the type of products and services provided. The Mechanical Equipment segment comprises that business of the Company that generally involves the fabrication of products from metals based materials. Such products include machined production components for their own fabrication or assembly of products. Products manufactured by this segment include automotive axles, transmission shafts, differential pins, heavy-duty engine rocker arms, and assembled specialty equipment, as well as electric motors and cable pressurization equipment.
The second segment has been identified as the Plastics and Rubber segment. This segment is composed of operations that utilize a variety of plastic and rubber based compounds to either produce components or market end products to this segments customer base. This segment fabricates production parts to the automotive industry in a variety of interior molding and under-the-hood applications, as well as distributes certain purchased products to a diverse customer base. This segment also includes the importation and sale of impulse toys.
The accounting policies of the Company’s operating segments are the same as those presented in Note 2. There are no inter-segment sales and management allocates all corporate expenses to the segments. Each segment is managed according to the products, which are provided to the respective customers and information is reported on the basis of reporting to the Company’s chief operating decision maker.
F-24
EXX INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. Segment information (continued)
Operating segment information for 2003, 2002, and 2001 is summarized as follows:
| Mechanical Equipment | Plastics and Rubber | Corporate | Consolidated | ||||||||||
2003 | |||||||||||||
Net sales | $ | 112,187,000 | $ | 23,287,000 | $ | — | $ | 135,474,000 | |||||
Income (loss) from continuing operations before income taxes | $ | 9,987,000 | $ | 2,911,000 | $ | (4,850,000 | ) | $ | 8,048,000 | ||||
Assets | $ | 47,119,000 | $ | 15,107,000 | $ | 38,839,000 | $ | 101,065,000 | |||||
Depreciation and amortization | $ | 4,506,000 | $ | 1,194,000 | $ | 1,708,000 | $ | 7,408,000 | |||||
Capital expenditures | $ | 5,009,000 | $ | 134,000 | $ | 85,000 | $ | 5,228,000 | |||||
2002 | |||||||||||||
Net sales | $ | 8,299,000 | $ | 7,887,000 | $ | — | $ | 16,186,000 | |||||
Income (loss) before income taxes | $ | 516,000 | $ | 1,195,000 | $ | (482,000 | ) | $ | 1,229,000 | ||||
Assets | $ | 3,183,000 | $ | 6,169,000 | $ | 9,053,000 | $ | 18,405,000 | |||||
Depreciation and amortization | $ | 80,000 | $ | 130,000 | $ | — | $ | 210,000 | |||||
Capital expenditures | $ | 27,000 | $ | 2,000 | $ | — | $ | 29,000 | |||||
F-25
EXX INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 14. | Segment information (continued) |
| Mechanical Equipment | Plastics and Rubber | Corporate | Consolidated | ||||||||||
2001 | |||||||||||||
Net sales | $ | 10,910,000 | $ | 7,472,000 | $ | — | $ | 18,382,000 | |||||
Income (loss) before income taxes | $ | 2,083,000 | $ | 954,000 | $ | (2,043,000 | ) | $ | 994,000 | ||||
Assets | $ | 3,924,000 | $ | 5,353,000 | $ | 8,612,000 | $ | 17,889,000 | |||||
Depreciation and amortization | $ | 100,000 | $ | 148,000 | $ | — | $ | 248,000 | |||||
Capital expenditures | $ | 24,000 | $ | — | $ | — | $ | 24,000 | |||||
The following is a listing of revenue by major product group sold by the operating segments of the Company for 2003, 2002 and 2001:
| 2003 | 2002 | 2001 | |||||||
Mechanical Equipment | |||||||||
Machined production components | $ | 103,889,000 | $ | — | $ | — | |||
Electric motors and cable pressurization equipment | 8,298,000 | 8,299,000 | 10,910,000 | ||||||
Total | $ | 112,187,000 | $ | 8,299,000 | $ | 10,910,000 | |||
Plastics and Rubber | |||||||||
Manufactured molded plastic and rubber components | $ | 15,585,000 | $ | — | $ | — | |||
Impulse toys and other | 7,702,000 | 7,887,000 | 7,472,000 | ||||||
| $ | 23,287,000 | $ | 7,887,000 | $ | 7,472,000 | ||||
F-26
EXX INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 14. | Segment information (continued) |
As a result of the acquisition of Newcor (See Note 3), the segment classifications of the Company have been modified. The toy segment disclosed in prior years is now included in the plastics and rubber segment.
Net sales to countries outside of the United States for the years ended December 31, 2003, 2002 and 2001 were approximately $5,815,000, $933,000 and $1,534,000, respectively, and were attributable primarily to sales from the Company’s mechanical equipment segment. There were no significant sales to any individual country or region outside of the United States.
The mechanical equipment segment had sales to two major customers in 2003 that exceeded 10% of sales. The plastics and rubber segment had sales to one major customer in 2002 and 2001 that exceeded 10% of sales.
| 15. | Selected quarterly results (Unaudited) |
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||
2003 (a) (b) | ||||||||||||
Net sales | $ | 27,962,000 | $ | 39,235,000 | $ | 34,360,000 | $ | 33,917,000 | ||||
Gross profit | $ | 5,200,000 | $ | 7,664,000 | $ | 6,035,000 | $ | 6,227,000 | ||||
Net income | $ | 1,245,000 | $ | 2,113,000 | $ | 1,692,000 | $ | 767,000 | ||||
F-27
EXX INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| 15. | Selected quarterly results (Unaudited) (continued) |
Basic net income per common share: | ||||||||||||
Income from continuing operations | $ | 0.10 | $ | 0.18 | $ | 0.12 | $ | 0.07 | ||||
Income from discontinued operations | 0.01 | 0.01 | 0.03 | |||||||||
Net income | $ | 0.11 | $ | 0.19 | $ | 0.15 | $ | 0.07 | ||||
Assuming dilution net income per common share: | ||||||||||||
Income from continuing operations | $ | 0.10 | $ | 0.16 | $ | 0.10 | $ | 0.07 | ||||
Income from discontinued operations | 0.01 | 0.01 | 0.03 | |||||||||
Net income | $ | 0.11 | $ | 0.17 | $ | 0.13 | $ | 0.07 | ||||
2002 | ||||||||||||
Net sales | $ | 3,789,000 | $ | 4,206,000 | $ | 4,208,000 | $ | 3,983,000 | ||||
Gross profit | $ | 1,182,000 | $ | 1,418,000 | $ | 1,412,000 | $ | 1,241,000 | ||||
Net income | $ | 81,000 | $ | 217,000 | $ | 207,000 | $ | 331,000 | ||||
Basic net income per common share | $ | 0.01 | $ | 0.02 | $ | 0.02 | $ | 0.02 | ||||
Assuming dilution net income per common share | $ | 0.01 | $ | 0.02 | $ | 0.02 | $ | 0.02 | ||||
| (a) | Adjusted to give effect to discontinued operations recorded in the third quarter of 2003. |
| (b) | Each of the quarters have been adjusted to reflect additional amortization of customer relationships (see Note 3) |
F-28
EXX INC AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
COLUMN A | Column B | Column C | Column D | Column E | |||||||||||
Balance at | Additions - | Deductions is | Balance at End of Period | ||||||||||||
DESCRIPTION | Charged to income | Charged to other accounts | |||||||||||||
2003 | |||||||||||||||
Reserve for bad debts and allowances | $ | 119,000 | $ | 18,000 | $ | 88,000 | $ | 45,000 | $ | 180,000 | |||||
Reserve for returns and allowances | $ | 444,000 | $ | — | — | $ | 102,000 | $ | 342,000 | ||||||
Reserve for dispositions of inventories | $ | 494,000 | $ | 118,000 | $ | 259,000 | $ | 36,000 | $ | 835,000 | |||||
2002 | |||||||||||||||
Reserve for bad debts and allowances | $ | 91,000 | $ | 35,000 | $ | — | $ | 7,000 | $ | 119,000 | |||||
Reserve for returns and allowances | $ | 581,000 | $ | — | $ | — | $ | 137,000 | $ | 444,000 | |||||
Reserve for dispositions of inventories | $ | 494,000 | $ | — | $ | — | $ | — | $ | 494,000 | |||||
2001 | |||||||||||||||
Reserve for bad debts and allowances | $ | 88,000 | $ | 3,000 | $ | — | $ | — | $ | 91,000 | |||||
Reserve for returns and allowances | $ | 580,000 | $ | 1,000 | $ | — | $ | — | $ | 581,000 | |||||
Reserve for dispositions of inventories | $ | 496,000 | $ | — | $ | — | $ | 2,000 | $ | 494,000 | |||||
S-1
