SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended March 31, 2001 Commission file number: 0-17824
REXHALL INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
California 95-4135907
(State of Incorporation) (IRS Employer Identification No.)
46147 7th Street West, Lancaster California 93534
(Address of principal executive offices) (Zip Code)
(661) 726-0565
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No _____.
Applicable only to Corporate Issuers
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 3,036,350 as of 5/14/01.
REXHALL INDUSTRIES, INC.
INDEX
PART 1 - FINANCIAL INFORMATION PAGE NUMBER
Item 1.
Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets at March 31, 2001
and December 31, 2000 3
Condensed Consolidated Statements of Operations for the
three months ended March 31,2001 and March 31, 2000 4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2001
and March 31, 2000 5
Notes to Condensed Consolidated Financial Statements
6-7
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
Item 3.
Quantitative and Qualitative Disclosure about Market Risks 10
PART II - OTHER INFORMATION
Repurchase Agreements 10
Legal Proceedings 10
Signatures 11
PART I - FINANCIAL INFORMATION
Item 1. - Condensed Consolidated Financial Statements
REXHALL INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS (Unaudited) (Audited)
March 31, December 31,
2001 2000
CURRENT ASSETS
Cash $ 4,014,000 $ 3,427,000
Accounts Receivable - Net 3,936,000 5,832,000
Inventories - Net 23,944,000 22,475,000
Income Tax Receivable 199,000 281,000
Deferred Income Taxes 821,000 821,000
Other Current Assets 256,000 340,000
Total Current Assets 33,170,000 33,176,000
Property and Equipment - Net 6,153,000 6,152,000
Property Held for Sale 125,000 127,000
Other Assets 175,000 154,000
TOTAL ASSETS $39,623,000 $39,609,000
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 5,891,000 $ 6,773,000
Notes Payable and current
portion of long-term debt 7,673,000 6,638,000
Warranty Reserve 646,000 837,000
Accrued Legal 401,000 445,000
Dealer Incentives 758,000 732,000
Other Accrued Liabilities 599,000 691,000
Accrued Compensation and Benefits 469,000 371,000
Total Current Liabilities 16,437,000 16,487,000
Deferred Income Tax Liabilities 55,000 55,000
Long Term Debt, less current portion 697,000 705,000
TOTAL LIABILITIES 17,189,000 17,247,000
SHAREHOLDERS' EQUITY
Preferred Stock - no par value;
Authorized 1,000,000 shares;
No shares outstanding
Common Stock - no par value;
Authorized 10,000,000 shares; issued and
outstanding 3,047,000 and 3,057,000 at March 31, 2001
and December 31,2000 6,191,000 6,241,000
Loan receivable from exercise of options (54,000) (57,000)
Retained Earnings 16,297,000 16,178,000
TOTAL SHAREHOLDERS' EQUITY 22,434,000 22,362,000
TOTAL LIABILITIES
& SHAREHOLDERS' EQUITY $39,623,000 $39,609,000
See accompanying notes to condensed consolidated financial statements.
PART I - FINANCIAL INFORMATION
Item 1. - Condensed Consolidated Financial Statements
REXHALL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
March 31, 2001 March 31, 2000
Net Revenues $ 18,582,000 $ 20,664,000
Cost of Sales 16,077,000 17,361,000
Gross Profit 2,505,000 3,303,000
Selling, General, Administrative
and Other Expenses 2,304,000 1,648,000
Income Before Income Taxes 201,000 1,655,000
Income Taxes 82,000 691,000
Net Income $ 119,000 $ 964,000
Basic and Diluted Net Income
Per Common Share $ .04 $ .31
Weighted Average
Shares Outstanding-Basic and Diluted 3,056,000 3,160,000
See accompanying notes to condensed consolidated financial statements.
PART I - FINANCIAL INFORMATION
Item 1. - Condensed Consolidated Financial Statements
REXHALL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31, 2001 March 31, 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 119,000 $ 964,000
Adjustments to reconcile net income to net cash provided by
Operating Activities:
Depreciation and Amortization 104,000 120,000
Gain on Sale of Property,
Plant and Equipment (3,000) ---
Provision for Deferred Income Tax --- 44,000
(INCREASE) DECREASE IN:
Accounts Receivable 1,896,000 959,000
Inventories (434,000) 1,340,000
Income Tax Receivable 82,000 ---
Other 63,000 52,000
INCREASE (DECREASE) IN:
Accounts Payable (882,000) (2,653,000)
Warranty Reserve (191,000) (39,000)
Accrued Legal (44,000) (49,000)
Other Current Liabilities 90,000 411,000
Dealer Incentives 26,000 (117,000)
Net cash provided by
operating activities 826,000 1,032,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property,
Plant and Equipment (185,000) (95,000)
Proceeds from Sale of Property,
Plant and Equipment 85,000 ---
Net cash used in investing activities (100,000) (95,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (8,000) (7,000)
Repayment of short-term notes (84,000) (36,000)
Proceeds from Exercise of Stock Options 3,000 ---
Repurchase and retirement of stock (50,000) ---
Net cash used in
financing activities (89,000) (43,000)
NET INCREASE IN CASH 587,000 894,000
BEGINNING CASH BALANCE 3,427,000 6,330,000
ENDING CASH BALANCE $4,014,000 $ 7,224,000
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES:
Inventory Purchases on
Vehicle Credit Facility $1,035,000 ---
See accompanying notes to condensed consolidated financial statements.
PART I - FINANCIAL INFORMATION
Item 1.
REXHALL INDUSTRIES, INC.
Notes to the Condensed Consolidated Financial Statements
March 31, 2001 and 2000
1. Basis of Presentation:
The accompanying unaudited Condensed Consolidated Financial Statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial
statements. However, in the opinion of management, they include all
adjustments, consisting of normal accruals, necessary to present fairly the
information set forth herein in accordance with generally accepted accounting
principles for interim reporting.
For further information refer to the Financial Statements and footnotes
included in the Registrant's Annual Report on Form 10-K for the year ended
December 31, 2000.
The results of operations for any interim period are not necessarily
indicative of the results to be expected for the full year.
2. Summary of Significant Accounting Polices:
Income Taxes
Income tax expense is based upon the estimated effective tax rate for the
entire fiscal year. The effective tax rate is subject to ongoing evaluation
by management.
Earnings Per Share
Basic earnings per share represents net earnings divided by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share represents net earnings divided by the weighted-average
number of shares outstanding, inclusive of the dilutive impact of common stock
options.
3. Details of Inventory March 31, 2001 December 31, 2000
Raw Materials $ 5,706,000 $ 6,561,000
Work-in-Progress 1,859,000 1,810,000
Finished Goods 16,379,000 14,104,000
TOTAL $23,944,000 $22,475,000
4. Segment Information
The Company's reportable business segments are manufacturing and retail
operations. Management evaluates segment performance based primarily on
revenue and net income (loss).
Segment information is summarized as follows (in thousands):
March 31, 2001 March 31, 2000
Net Revenues:
Manufacturing $ 15,508 $ 20,664
Retail Operations 5,210 ---
Intercompany Elimination (2,136) ---
$ 18,582 $ 20,664
Net Income (Loss):
Manufacturing $ 262 $ 964
Retail Operations (108) ---
Intercompany Elimination (35) ---
$ 119 $ 964
March 31, 2001 December 31, 2000
Total Assets:
Manufacturing $ 32,279 $ 33,311
Retail Operations 8,951 8,905
Intercompany Elimination (1,607) (1,797)
$ 39,623 $ 39,609
PART I - FINANCIAL INFORMATION
Item 2. - Management Discussion and Analysis of Financial Condition and
Results of Operations. All statements in this discussion and analysis which
relate to future sales, costs, capital expenditures or earnings are
"Forward-Looking Statements" and should be read subject to the assumptions
contained in the section "Forward-Looking Statements".
Results of Operations
Comparison of the Three Months ended March 31, 2001 to the Three Months ended
March 31, 2000
Revenues - 2001 Compared with 2000
Net revenues for the first quarter ended March 31, 2001 were $18,582,000 as
compared to $20,664,000 for the first quarter in 2000. This represents a
10.1% decrease from the prior year.
Net revenues for the manufacturing operations were $15,508,000 on net
shipments of 194 units, which were down 25% and 33%, respectively, when
compared to the first quarter of 2000. Wholesale shipments of the Company's
gas motorhomes were down 46%, while diesel motorhome shipments were up 93%
when compared to last year's first quarter.
Retail operations generated net revenues of $5,210,000 on sales of 33 new
motorhomes, 31 used motorhomes, and 70 towables. Since the Company did not
have retail operations in the first quarter of 2000, no comparisons can be
made. Intercompany eliminations account for the difference between the total
net revenues and the sum of manufacturing and retail operations.
The decline in net revenues is primarily attributable to an industry-wide
decline in Class "A" shipments of 35% when compared to last year. Poor RV
industry fundamentals of weakened consumer confidence, a tightening of credit,
and high fuel costs continue to be the driver of the overall down market.
Management cannot determine when these conditions will improve.
Gross Profit - 2001 compared with 2000
Gross profit for the quarter decreased to $2,505,000 from $3,303,000 for the
same quarter last year, which is a decrease of $798,000 or 24.2%. The gross
margin was 13.5% versus 16.0% last year.
Gross profit for manufacturing operations decreased to $1,932,000 from
$3,303,000 for the same quarter in 2000, which is a decrease of $1,371,000 or
41.5%. Gross margin was 12.5% as compared to 16.0% last year. The decrease
in gross margin was attributable to lower sales and higher material and
overhead costs absorbed by each unit. The decrease in sales created a smaller
absorption base for manufacturing overhead. The nature of these costs is less
variable than direct materials and labor, so overhead absorption suffers in
periods of declining sales. Contrary to what the rest of the industry
experienced, the Company did not have to significantly increase its level of
rebates or discounts to hold market share.
Retail operations' gross profit was $586,000 with a gross margin of 11.2%.
Since the Company did not have retail operations in the first quarter of 2000,
no comparisons can be made. Intercompany eliminations account for the
difference between the total net revenues and the sum of manufacturing and
retail operations.
Management expects the margins to hold or improve, but there are no
assurances due to the unknown direction of the RV industry fundamentals and
competition within the industry.
Selling, General Administrative and Other Expenses-2001 compared with 2000
Selling,General and Administrative and Other Expenses increased by
approximately $656,000 from the first quarter of 2000 to the first quarter of
2001. Selling, general administrative and other expenses increased to 12.4%
as a percentage of sales when compared to 8.0% for the quarter ended March 31,
2000.
For manufacturing operations, S, G & A and other expenses decreased
$152,000 to $1,496,000, but increased as a percentage of sales from 8.0% to
9.6% due to the decline in sales base.
Retail operations' S, G & A and other expenses were $763,000 or 14.6% of
sales. Retail operations typically have a higher percentage of expenses in
these areas due to the nature of the business. Intercompany eliminations
account for the difference between the total S,G, & A and other expenses and
the sum of manufacturing and retail operations.
Income Before Taxes - 2001 Compared to 2000
Income tax expense was $82,000 for the quarter ended March 31, 2001 as
compared to $691,000 in the first quarter of 2000. Income taxes are
provided based upon the estimated effective tax rate for the entire fiscal
year applied to the pre-tax income for the period. The effective tax rate is
subject to ongoing evaluation by management.
Financial Condition, Capital Resources and Liquidity
The Company has relied primarily on internally generated funds, trade credit
and debt to finance its operations and expansions. As of March 31, 2001, the
Company had working capital of $16,733,000, compared to $16,691,000 at
December 31, 2000. The $42,000 increase in working capital is primarily due
to a $587,000 increase in cash, a $1,469,000 increase in inventories and a
$882,000 decrease in accounts payable, partially offset by a $1,896,000
decrease in accounts receivable and a $1,035,000 increase in notes payable.
Capital expenditures during the first quarter of 2001 were $185,000.
Management anticipates an increase in the rate of capital expenditures for the
remainder of 2001 related to refurbishment and expansion of the production
facilities and related production equipment. The anticipated increases are
expected to be incurred when the Company begins construction of the new
facility.
As of March 31, 2001 the Company has a $3,500,000 line of credit with a bank
which can be used for working capital purposes. The line expires on July 1,
2001 at which time we expect the line to be renewed. Under this line of
credit, $283,000 has been set aside as an irrevocable standby letter of credit
for the Company to meet the requirements for self-insurance established by the
Department of Industrial Relations which regulates workmen's compensation
insurance in California. At March 31, 2001, no amounts were outstanding
under the line of credit agreement. The line of credit contains various
covenants. The Company was in compliance with such covenants as of
March 31, 2001.
The Company has a line of credit with a chassis vendor, Ford Motor Credit
Company ("FMCC"), with an $8,000,000 limit. Borrowings under the line bear
interest at an annual rate of prime plus 1% (10% at March 31, 2001). All
borrowings are secured by the Ford merchandise. The outstanding balance
included in accounts payable at March 31, 2001 was $3,413,000.
The Company has a line of credit with a financial institution for financing
purchases of inventory for its retail operations. The line of credit has a
limit of $7,500,000 and borrowings under the line bear interest at an annual
rate of prime plus .5% (9.5% at March 31, 2001). All borrowings are secured
by inventory held by the Company's retail operations. The balance
outstanding at March 31, 2001 was $7,640,000. The over limit was done at the
financial institution's discretion and is without penalty to the Company.
The Company anticipates that it will be able to satisfy its ongoing cash
requirements through 2001, including payments related to the expansion plans
at the California facility, primarily with cash flows from operations,
supplemented, if necessary, by borrowings under its revolving credit
agreement.
Forward-Looking Statements
Our statements of our intentions or expectations are "forward-looking
statements" based on assumptions and on facts known to us today. Those
assumptions will become less valid over time, but we do not intend to update
this report. Rexhall's business is seasonal, and sales should be increasing
now, but the market factors are depressing the industry sales. Low interest
rates, low unemployment, and ready availability of motor fuel have in the
past been associated with favorable recreational vehicle sales as has
occurred in 1998 and 1999. However, the recent gas price increases, coupled
with recent reports of decreased consumer confidence are depressing the
market and may reduce future sales. Many of Rexhall's competitors are
substantially larger, and many of its suppliers and dealer's also have
greater economic power so that the volume and prices of both supplies and
sales may be adversely affected. Management intends to remain aware of these
factors and react to them, but cannot predict their timing or significance
Item 3. Quantitative and Qualitative Disclosure About Market Risk
In the ordinary course of its business, the Company is exposed to certain
market risks, including changes in interest rates. After an assessment of
these risks to the Company's operations, the Company believes that its
primary market risk exposures relating to interest rates (within the meaning
of Regulation S-K Item 305) are not material and are not expected to have any
material adverse effect on the Company's financial condition, results of
operations or cash flows for the next fiscal year. The Company's line of
credit permits a combination of fixed and variable rates at the Company's
option, which Management believes reduces the risk of interest rate
fluctuations.
Part II - Other Information
Repurchase Agreements - Motorhomes purchased under financing agreements by
dealers are subject to repurchase by the Company, in some cases, at dealer
cost plus unpaid interest in the event of default by the dealer. During
2000, 1999 and 1998 the Company repurchased approximately $4,190,000,
$1,973,000 and $832,000 respectively, of motorhomes under these agreements.
At March 31, 2001 and December 31, 2000, approximately $25,800,000 and
$26,700,000, respectively, of dealer inventory is covered by repurchase
agreements. Dealers do not have the contractual right to return motorhomes
under any Rexhall Dealer Agreement. There are also a number of states
statutes which require the repurchasing of motorhomes whenever a dealership
is terminated.
Item 1- Legal Proceedings
Litigation -The Company is a defendant in various legal proceedings from the
normal course of business. In the opinion of Company management, the
resolution of such matters will not have a material effect on its financial
statements or results of operations.
REXHALL INDUSTRIES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
Rexhall Industries, Incorporated
(Registrant)
By /S/ William J. Rex
(Signature and Title)*
William J. Rex,
President, CEO and Chairman
Date: May 15, 2001
By /S/ J. Michael Bourne
(Signature and Title)*
J. Michael Bourne,
Executive V.P., COO and Acting CFO
Date: May 15, 2001
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant in capacities and on the
dates indicated.
By /S/ William J. Rex
(Signature and Title)*
William J. Rex
President & CEO
Chairman of the Board
Date: May 15, 2001
By /S/ Donald C. Hannay, Sr.
(Signature and Title)*
Donald C. Hannay, Sr.
Vice President of Sales & Marketing
Director
Date: May 15, 2001
By /S/ Robert A. Lopez
(Signature and Title)*
Robert A. Lopez
Director
Date: May 15, 2001
By /S/ Frank A. Visco
(Signature and Title)*
Frank A. Visco
Director
Date: May 15, 2001
By /S/ Dr. Dennis K. Ostrom
(Signature and Title)*
Dr. Dennis K. Ostrom
Director
Date: May 15, 2001