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 September 30, 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 11/14/01.
<page>
REXHALL INDUSTRIES, INC.
INDEX
PART 1 - FINANCIAL INFORMATION PAGE NUMBER
Item 1.
Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets at September 30, 2001 3
and December 31, 2000
Condensed Consolidated Statements of Operations for the
three and nine months ended September 30,2001
and September 30, 2000 4-5
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 2001
and September 30, 2000 6
Notes to Condensed Consolidated Financial Statements
as of September 30, 2001 7-8
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-12
Item 3.
Quantitative and Qualitative Disclosure about Market Risks 13
PART II - OTHER INFORMATION
Repurchase Agreements 13
Legal Proceedings 14
Signatures 15
<page>
PART I - FINANCIAL INFORMATION
Item 1. - Condensed Consolidated Financial Statements
REXHALL INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS (Unaudited) (Audited)
September 30 December 31
2001 2000
CURRENT ASSETS
Cash $ 4,439,000 $ 3,427,000
Accounts Receivable - Net 2,099,000 5,832,000
Inventories 21,457,000 22,475,000
Income Tax Receivable 642,000 281,000
Deferred Income Taxes 821,000 821,000
Other Current Assets 184,000 340,000
Total Current Assets 29,642,000 33,176,000
Property and Equipment - Net 6,005,000 6,152,000
Property Held for Sale 123,000 127,000
Other Assets 153,000 154,000
TOTAL ASSETS $35,923,000 $39,609,000
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 4,013,000 $ 6,773,000
Notes Payable and current portion
of long-term debt 6,371,000 6,638,000
Warranty Reserve 654,000 837,000
Accrued Legal 655,000 445,000
Dealer Incentives 853,000 732,000
Other Accrued Liabilities 499,000 691,000
Accrued Compensation and Benefits 280,000 371,000
Total Current Liabilities $13,325,000 $16,487,000
Deferred Income Tax Liabilities 55,000 55,000
Long-Term Debt, less current portion 679,000 705,000
TOTAL LIABILITIES 14,059,000 17,247,000
SHAREHOLDERS' EQUITY
Preferred Stock - no par value;
Authorized 1,000,000 shares; No
shares outstanding at September 30, 2001
and December 31, 2000 --- ---
Common Stock - no par value;
Authorized 10,000,000 shares; issued and
outstanding 3,036,000 and 3,057,000
shares at September 30, 2001
and December 31, 2000 6,139,000 6,241,000
Loan receivable from exercise
of options (49,000) (57,000)
Retained Earnings 15,774,000 16,178,000
TOTAL SHAREHOLDERS' EQUITY 21,864,000 22,362,000
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $35,923,000 $39,609,000
See accompanying notes to condensed consolidated financial statements
<page>
PART I - FINANCIAL INFORMATION
Item 1. - Condensed Consolidated Financial Statements
REXHALL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended
September 30, 2001 September 30, 2000
Net Revenues $ 13,925,000 $ 12,488,000
Cost of Sales 12,590,000 9,944,000
Gross Profit 1,335,000 2,544,000
Selling, General, Administrative
Expenses and Other Expenses 2,423,000 1,661,000
Income (Loss) Before Income Taxes (1,088,000) 883,000
Income Tax Expense (Benefit) (433,000) 385,000
Net Income (Loss) $ (655,000) $ 498,000
Basic and Diluted Net Income
(Loss) per Common Share $ (.22) $ 0.16
Weighted Average
Shares Outstanding -
Basic and Diluted 3,036,000 3,096,000
See accompanying notes to condensed consolidated financial statements
<page>
PART I - FINANCIAL INFORMATION
Item 1. - Condensed Consolidated Financial Statements
REXHALL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Nine Months Ended
September 30, 2001 September 30, 2000
Net Revenues $ 50,287,000 $ 47,983,000
Cost of Sales 44,458,000 40,363,000
Gross Profit 5,829,000 7,620,000
Selling, General, Administrative
Expenses and Other Expenses 6,494,000 4,427,000
Income (Loss) Before Income Taxes (665,000) 3,193,000
Income Tax Expense (Benefit) (261,000) 1,371,000
Net Income (Loss) $ (404,000) $ 1,822,000
Basic and Diluted Net Income
(Loss) Per Share $ (.13) $ 0.58
Weighted Average
Shares Outstanding -
Basic and Diluted 3,043,000 3,144,000
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)
Nine Months Ended
September 30, 2001 September 30, 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (404,000) $ 1,822,000
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
Operating Activities:
Depreciation and Amortization 306,000 372,000
Gain on Sale of Property,
Plant and Equipment (3,000) ---
Provision for Deferred Income Tax --- 164,000
(INCREASE) DECREASE IN:
Accounts Receivable 3,733,000 2,843,000
Inventories 1,018,000 (1,349,000)
Income Tax Receivable (361,000) ---
Other Assets 157,000 115,000
INCREASE (DECREASE) IN:
Accounts Payable (2,760,000) (3,531,000)
Warranty Reserve (183,000) (200,000)
Accrued Legal 210,000 (287,000)
Other Current Liabilities (116,000) (93,000)
Dealer Incentives 121,000 (150,000)
Net cash provided by (used in)
operating activities 1,718,000 (294,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (237,000) (1,192,000)
Proceeds from the Sale of Property,
Plant and Equipment 85,000 ---
Net cash used in investing activities (152,000) (1,192,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt (26,000) (22,000)
Repayment of short-term debt (434,000) (71,000)
Proceeds from Exercise of Stock Options 8,000 ---
Repurchase and retirement of stock (102,000) (484,000)
Net cash used in financing activities (554,000) (577,000)
NET INCREASE (DECREASE) IN CASH 1,012,000 (2,063,000)
BEGINNING CASH BALANCE 3,427,000 6,330,000
ENDING CASH BALANCE $ 4,439,000 $ 4,267,000
<page>
PART I - FINANCIAL INFORMATION
Item 1.
REXHALL INDUSTRIES, INC.
Notes to the Condensed Consolidated Financial Statements
September 30, 2001
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 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 income (loss) divided by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share represents net income (loss) divided by the
weighted-average number of shares outstanding, inclusive of the dilutive
impact of common stock options, if any. No options were outstanding during
the periods ended September 30, 2001 and 2000.
3. Details of Inventory: September 30, 2001 December 31, 2000
Raw Material $ 5,121,000 $ 6,561,000
Work-in-Progress 1,370,000 1,810,000
Finished Goods - Manufacturing 7,931,000 6,579,000
Finished Goods - Retail Operations 7,035,000 7,525,000
TOTAL $21,457,000 $22,475,000
<page>
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):
Three Months Ended
September 30, 2001 September 30, 2000
Net Revenues:
Manufacturing $12,674 $12,488
Retail Operations 1,822 ---
Intercompany Elimination (571) ---
$13,925 $12,488
Net Income (Loss):
Manufacturing $ (497) $ 498
Retail Operations (168) ---
Intercompany Elimination 10 ---
$ (655) $ 498
Nine Months Ended
September 30, 2001 September 30, 2000
Net Revenues:
Manufacturing $ 44,425 $ 47,983
Retail Operations 8,802 ---
Intercompany Elimination (2,940) ---
$ 50,287 $ 47,983
Net Income (Loss):
Manufacturing $ (22) $ 1,822
Retail Operations (392) ---
Intercompany Elimination 10 ---
$ (404) $ 1,822
September 30, 2001 December 31, 2000
Total Assets:
Manufacturing $ 30,404 $ 33,311
Retail Operations 7,370 9,181
Intercompany Elimination (1,851) (2,883)
$ 35,923 $ 39,609
5. Certain reclassifications have been made to the 2000 financial statements
to conform to the 2001 presentation.
<page>
PART I - FINANCIAL INFORMATION
Item 2. - Management's 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
"Forwarding Looking Statements" and should be read subject to the assumptions
contained in the "Forward Looking Statements".
Results of Operations
Comparison of the Three Months ended September 30, 2001 to the Three Months
ended September 30, 2000:
Revenues - 2001 compared with 2000
Net Revenues were $13,925,000 for the third quarter ended September 30, 2001
compared to $12,488,000 for the same quarter in the prior year. The third
quarter sales in 2001 represented a 11.5% increase from the comparable
quarter of 2000. Net units sold for the third quarter 2001 were 169 new and
5 used motorhomes along with 7 towables as compared to 171 new motorhomes for
the same period of 2000.
Net revenues for the manufacturing operations were $12,674,000 on net
shipments of 158 units, which were up 1% and down 8%, respectively, when
compared to the third quarter of 2000. Wholesale shipments of the Company's
gas motorhomes were down 36%, while diesel motorhome shipments were up 100%
when compared to last year's third quarter. The decrease in net shipments
is primarily attributable to an industry-wide decline in Class "A" shipments
of 10% when compared to last year. The events of September 11, 2001 had a
major effect on shipments in September, which were approximately 30% of the
2001 monthly average. This was compounded by the continuing difficulty of
poor RV industry fundamentals of weakened consumer confidence and a
tightening of credit which are creating an overall down market. Management
cannot determine when these conditions will improve.
Retail operations generated net revenues of $1,822,000 on sales of 9 new
motorhomes, 5 used motorhomes, and 7 towables. Since the Company did not
have retail operations in the third 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.
Gross Profit - 2001 compared with 2000
Gross Profit as a percentage of sales was 9.6% for the quarter ended
September 30, 2001 as compared to 20.4% for the same period in the prior
year. Gross profit for the third quarter decreased to $1,335,000 from
$2,544,000 for the same quarter last year, which is a decrease of $1,209,000
or 47.5%.
Gross profit for manufacturing operations decreased to $1,257,000 from
$2,544,000 for the same quarter in 2000, which is a decrease of $1,287,000 or
50.6%. Gross margin was 9.9% as compared to 20.4% last year. A $392,000
write-down of finished goods inventory was recorded as of September 30, 2001
to properly reflect lower-of-cost or market inventory valuations.
Additionally, the decrease in gross margin was attributable to higher
material and overhead costs absorbed by each unit. The decrease in units
sold 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 shipments.
Retail operations' gross profit was $62,000 with a gross margin of 3.4%. A
$136,000 write-down of finished goods inventory was recorded as of September
30, 2001 to properly reflect lower-of-cost or market inventory valuations.
Since the Company did not have retail operations in the third 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.
<page>
Management expects the margins in the fourth quarter to be similar to the
third quarter, so the year-to-date margins should decrease slightly, 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 Administrative and Other Expenses were $2,423,000 and
$1,661,000 for the third quarter ended September 30, 2001 and 2000,
respectively. The percentage of sales for the three months ended September
30, 2001 is 17.4% compared to 13.3% for the same period in 2000.
For manufacturing operations, S, G & A and other expenses increased $423,000
to $2,084,000, and increased as a percentage of sales from 13.3% to 16.4%.
The increase is primarily related to an increase in bad debt and
legal reserves, partially offset by reduced officer's bonus and dealer
incentives.
Retail operations' S, G & A and other expenses were $339,000 or 18.6% of
sales. The Company's retail operations tend to be seasonal in nature with
higher revenues in the first and fourth quarters. Cost reductions were
implemented in the second quarter of 2001, however, due to the lower sales
base, S, G & A as a percentage of sales is higher in the "off season".
Additionally, retail operations typically have a higher percentage of
expenses than manufacturing operations in these areas due to the nature of
the business. For instance, the retail operations incurred $147,000 of
interest charges related to the flooring of inventory during the period.
Intercompany eliminations account for the difference between the total
S,G, & A and other expenses and the sum of manufacturing and retail
operations.
Income Taxes - 2001 compared with 2000
Income tax benefit was $433,000 for the quarter ended September 30, 2001 as
compared to income tax expense of $385,000 in the third quarter of 2000
reflecting the decrease in income (loss) before income taxes. Income taxes
are provided based upon the estimated effective tax rate for the entire
fiscal year applied to pre-tax income for the period. The effective tax rate
is subject to ongoing review and evaluation by management.
Results of Operations
Comparison of the Nine Months ended September 30, 2001 to the Nine Months
ended September 30, 2000:
Revenues - 2001 compared with 2000
For the nine months ended September 30, 2001, net revenues were $50,287,000
compared to $47,983,000 for the same period in the prior year. This
represents a 4.8% increase from the prior year. Net units sold for the nine
months ended September 30, 2001 were 616 new and 48 used motorhomes along
with 107 towables compared to 664 new motorhomes for the nine months ended
September 30, 2000.
Net revenues for the manufacturing operations were $44,425,000 on net
shipments of 563 units compared to $47,983,000 on net shipments of 664 for
the nine months ended September 30, 2000. This represents a decrease of 7%
and 15%, respectively. Wholesale shipments of the Company's gas motorhomes
were down 36%, while diesel motorhome shipments were up 88% when compared to
the same period in 2000. The decline in net revenues is primarily
attributable to an industry-wide decline in Class "A" shipments of 23% 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
drivers of the overall down market. The events of September 11, 2001 only
<page>
compounded this difficult market and add to the uncertainty of the next
quarter. Management cannot determine when these conditions will improve.
Retail operations generated net revenues of $8,802,000 on sales of 51 new
motorhomes, 48 used motorhomes, and 107 towables. Since the Company did not
have retail operations during the first nine months 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.
Gross Profit - 2001 compared with 2000
Gross Profit was 11.6% for the nine months ended September 30, 2001 compared
to 15.9% for the same period in the prior year.
Gross profit for manufacturing operations decreased to $4,838,000 from
$7,620,000 for the same period in 2000, which is a decrease of $2,782,000 or
36.5% Gross margin was 10.9% as compared to 15.9% 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. Additionally, a $392,000
write-down of finished goods inventory was recorded as of September 30, 2001
to properly reflect lower-of-cost or market inventory valuations.
Retail operations' gross profit was $975,000 with a gross margin of 11.1%. A
$136,000 write-down of finished goods inventory was recorded as of September
30, 2001 to properly reflect lower-of-cost or market inventory valuations.
Since the Company did not have retail operations during the first nine months
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 in the fourth quarter to be similar to the
third quarter, so the year-to-date margins should decrease slightly, 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 to 2000
Selling, General Administrative and Other Expenses were $6,494,000 and
$4,427,000 for the nine months ended September 30, 2001 and 2000,
respectively. The percentage of sales for the nine months ended September
30, 2001 is 12.9% compared to 9.2% for the same period in 2000.
For manufacturing operations, S, G & A and other expenses increased $447,000
to $4,874,000 and increased as a percentage of sales from 9.2% to 11.0% due
to the decline in sales base. The increase is primarily related to an
increase in bad debt, research and development and legal expenses, partially
offset by a reduction in officer's bonus, dealer incentives and advertising.
Retail operations' S, G & A and other expenses were $1,620,000 or 18.4% of
sales. Retail operations typically have a higher percentage of expenses in
these areas due to the nature of the business versus manufacturing
operations. For instance, the retail operations incurred $467,000 of
interest charges related to the flooring of inventory during the period.
Income Taxes - 2001 compared with 2000
Income tax benefit for the nine months ended September 30, 2001 was $261,000
as compared to income tax expense of $1,371,000 for the same period in the
prior year reflecting the decrease in income (loss) before income taxes.
Income taxes are provided based upon the estimated effective 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.
<page>
Financial Condition, Capital Resources and Liquidity
The Company has relied primarily on internally generated funds, trade credit
and debt to finance its operations and expansion. As of September 30, 2001
the company had working capital of $16,347,000 compared to $16,317,000 at
December 31, 2000. The $372,000 decrease in working capital is primarily due
to a $3,733,000 decrease in accounts receivable, a $1,018,000 decrease in
inventory partially offset by a $2,760,000 decrease in accounts payable and a
$1,012,000 increase in cash.
Capital expenditures during the first nine months of 2001 were $237,000.
Management anticipates capital expenditures for the remainder of 2001 to be
minimal for refurbishment and expansion of certain production facilities and
production equipment. Management expects capital expenditures to increase in
2002 when the Company begins construction of a new facility.
Cash flows from financing activities for the nine months ended September 30,
2001 consisted primarily of stock repurchases of $102,000 and repayment of
short-term debt of $434,000 related to financing of the Company's insurance
policies and retail inventory. The Company will buy back stock in the open
market from time to time when the market price is deemed to be appropriate by
management.
As of September 30, 2001 the Company has a $2,500,000 line of credit with a
bank which can be used for working capital purposes. The line expires on
September 27, 2003. 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 worker's compensation insurance in California. At
September 30, 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 September 30, 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% (7.0% at September 30, 2001).
All borrowings are secured by the Company's assets. The outstanding balance
included in accounts payable at September 30, 2001 was $1,341,000.
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 0.5% (6.5% at September 30, 2001). All borrowings are
secured by inventory held by the Company's retail operations. The balance
outstanding at September 30, 2001 was $6,337,000.
The Company anticipates that it will be able to satisfy its ongoing cash
requirements through 2001 primarily with cash flows from operations,
supplemented, if necessary, by borrowings under its revolving credit
agreement.
Impact of Recently Issued Accounting Standards
In July 2001, the FASB issued Statement NO. 141, Business Combinations, and
Statement NO. 142, Goodwill and Other Intangible Assets. Statement 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 as well as purchase method
business combinations completed after June 30, 2001. Statement 141 also
specifies criteria intangible assets acquired in a purchase method business
combination must meet to be recognized and reported apart from goodwill,
noting that any purchase price allocable to an assembled workforce may not be
accounted for separately. Statement 142 will require that goodwill and
intangible assets with indefinite useful lives no longer be amortized, but
instead tested for impairment at least annually in accordance with the
provisions of Statement 142. Statement 142 will also require that intangible
assets with definite useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and reviewed for
impairment in accordance with SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of.
<page>
The Company is required to adopt the provisions of Statement 141 immediately,
except with the regard to certain business combinations initiated prior to
July 1, 2001 and Statement 142 effective January 1, 2002. Furthermore, any
goodwill and any intangible asset determined to have an indefinite useful
life that are acquired in a purchase business combinations completed after
June 30, 2001 will not be amortized, but will continue to be evaluated for
impairment in accordance with the appropriate pre-Statement 142 accounting
literature. Goodwill and intangible assets acquired in business combinations
completed before July 1, 2001 will continue to be amortized prior to the
adoption of Statement 142. The Company does not expect the adoption of
Statement 141 and 142 to have a significant impact on the statement of
financial position or result of operations.
In October 2001, the Financial Accounting Standards Board issued Statement
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.
This pronouncement provides new guidance on the recognition of impairment
losses on long-lived assets to be held and used or to be disposed of and
also broadens the definition of what constitutes a discontinued operation and
how the results of a discontinued operation are to be measured and presented.
The provisions of SFAS No. 144 are effective for financial statements issued
for fiscal years beginning after December 15, 2001. The Company presently
intends to adopt SFAS No. 144 effective January 1, 2002 and does not expect
adoption of these standards to have a material effect on the consolidated
financial statements.
Forward-Looking Statements
Our statements of our intentions, expectations or future conditions are
"forward-looking statements" based on assumptions and on facts known to us
today. We do not intend to update our assumptions or this report. Rexhall's
business is seasonal, and sales typically will be decreasing now, and economic
factors are further 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. Recent reports of
decreased consumer confidence, together with the events of September 11,
2001, 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, with greater ability to
withstand adversity. 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. A 1% increase/decrease in interest rates would result
in less than $65,000 of increase/decrease in interest expense.
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 September 30, 2001 and December 31, 2000, approximately $22,724,000 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 state
statutes which require the repurchasing of motorhomes whenever a dealership
is terminated.
<page>
Legal Proceedings - 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.
<page>
REXHALL INDUSTRIES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
Rexhall Industries, Incorporated
(Registrant)
By /S/ William J. Rex By /S/Dawn Diaz
Signature and Title)* (Signature and Title)*
William J. Rex, President, and Chief Financial Officer
CEO & Chairman Date: November 14, 2001
Officer
Date: November 14, 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: November 14, 2001
By /S/ Donald C. Hannay, Sr.
(Signature and Title)*
Donald C. Hannay, Sr.
Vice President of Sales & Marketing
Director
Date: November 14, 2001
By /S/ Robert A. Lopez
(Signature and Title)*
Robert A. Lopez
Director
Date: November 14, 2001
By /S/ Frank A. Visco
(Signature and Title)*
Frank A. Visco
Director
Date: May 14, 2001
By /S/ Dr. Dennis K. Ostrom
(Signature and Title)*
Dr. Dennis K. Ostrom
Director
Date: November 14, 2001