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 End March 31, 2002 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
(Regristrant'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 May 10,
2002.
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REXHALL INDUSTRIES, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE NUMBER
Item 1.
Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets at March 31, 2002
and December 31, 2001 3
Condensed Consolidated Statements of Operations for the
three months ended March 31, 2002 and March 31, 2001. 4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2002 and March 31, 2001 5
Notes to Condensed Consolidated Financial Statements 6-7
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-9
Item 3.
Quantitative and Qualitative Disclosure about Market Risks 9
PART II - OTHER INFORMATION
Repurchase Agreements 9
Legal Proceedings 9
Signatures 10
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PART I - FINANCIAL INFORMATION
Item 1.- Condensed Consolidated Financial Statements
REXHALL INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, 2002 December 31, 2001
ASSETS
CURRENT ASSETS
Cash $ 5,536,000 $ 8,662,000
Accounts Receivables, net 4,342,000 2,051,000
Income Tax Receivable 660,000 786,000
Inventories 11,651,000 12,546,000
Deferred Income Taxes 964,000 964,000
Other Current Assets 340,000 461,000
Current Assets of Discontinued
Operations 2,417,000 4,689,000
TOTAL CURRENT ASSETS 25,910,000 30,159,000
Property and Equipment at Cost Net
of Accumulated Depreciation 5,791,000 5,760,000
Property Held for Sale --- 122,000
Other Assets 153,000 151,000
Non-Current Assets of Discontinued
Operations 55,000 160,000
TOTAL ASSETS $31,909,000 $36,352,000
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 3,363,000 $ 3,423,000
Line of Credit 194,000 3,053,000
Notes Payable and Current Portion
of Long-Term Debt 35,000 34,000
Warranty Allowance 817,000 699,000
Accrued Legal 721,000 802,000
Dealer Incentives 1,101,000 1,139,000
Other Accrued Liabilities 1,779,000 1,376,000
Accrued Compensation and Benefits 512,000 367,000
Current Liabilities of Discontinued
Operations 2,262,000 4,509,000
TOTAL CURRENT LIABILITIES 10,784,000 15,402,000
Long-Term Debt, less Current Portion 662,000 671,000
TOTAL LIABILITIES 11,446,000 16,073,000
STOCKHOLDERS' EQUITY
Preferred Stock - no par value,
Authorized, 1,000,000 shares;
no shares outstanding at March 31, 2002
and December 31, 2001
Common Stock - no par value,
Authorized, 10,000,000 shares;
issued and outstanding
3,036,000 at March 31, 2002
and December 31, 2001 6,139,000 6,139,000
Loan Receivable from Exercise of
Options (43,000) (46,000)
Retained Earnings 14,367,000 14,186,000
TOTAL STOCKHOLDERS' EQUITY 20,463,000 20,279,000
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $31,909,000 $36,352,000
See accompanying notes to condensed consolidated financial statements
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REXHALL INDUSTRIES, INC.CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended
March 31, 2002 March 31, 2001
Net Revenues $17,407,000 $15,310,000
Cost of Sales 15,329,000 13,576,000
Gross Profit 2,078,000 1,734,000
Operating Expenses:
Selling, General, Administrative Expenses
and Other Expenses 1,765,000 1,297,000
Income from Continuing Operations
before Income Taxes 313,000 437,000
Income Tax Expense 126,000 175,000
Income from Continuing Operations 187,000 262,000
Loss from Discontinued Operations
(net of applicable income tax benefit
of nil and $93,000 in 2002 and 2001,
respectively (6,000) (143,000)
Net Income $ 181,000 $ 119,000
Basic and Diluted Income
from Continuing Operations -
Per Share $ .06 $ .09
Basic and Diluted Loss
from Discontinued Operations -
Per Share $ .00 ($ .05)
Basic and Diluted Income - Per Share $ .06 $ .04
Weighted Average Shares Outstanding
Basic and Diluted 3,036,000 3,056,000
See accompanying notes to condensed consolidated financial statements
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REXHALL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31, 2002 March 31, 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 181,000 $ 119,000
Adjustments to reconcile net income
to net cash provided by (used in)
Operating Activities:
Net loss from discontinued operations 6,000 143,000
Depreciation and amortization 95,000 97,000
Gain on sale of property, plant
and equipment (34,000) (3,000)
Provision for deferred income taxes --- (55,000)
(Increase) decrease in:
Accounts receivable (2,291,000) 2,374,000
Inventories 895,000 (1,076,000)
Income tax receivable 126,000 175,000
Increase (decrease) in:
Accounts payable (60,000) 175,000
Warranty allowance 118,000 (191,000)
Accrued legal (81,000) (44,000)
Dealer incentives (38,000) 26,000
Other assets and liabilities 773,000 181,000
Net cash provided by (used in)
operating activities (310,000) 1,921,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (129,000) (136,000)
Proceeds from sale of property and
equipment 159,000 85,000
Net cash provided by (used in)
investing activities 30,000 (51,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on long-term debt (9,000) (8,000)
Repayments on short-term notes (105,000) (84,000)
Repayments on line of credit (2,859,000) (1,079,000)
Proceeds from loan receivable on
exercise of stock options 3,000 3,000
Repurchase and retirement of stock --- (50,000)
Net cash (used in) financing
activities (2,970,000) (1,218,000)
NET CASH FLOWS FROM DISCONTINUED
OPERATIONS 124,000 (289,000)
NET INCREASE (DECREASE) IN CASH (3,126,000) 363,000
BEGINNING CASH BALANCE 8,662,000 3,448,000
ENDING CASH BALANCE $5,536,000 $3,811,000
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid during the period $ 18,000 $ 28,000
See accompanying notes to condensed consolidated financial statements
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REXHALL INDUSTRIES, INC.
Notes to the Condensed Consolidated Financial Statements
March 31, 2002 and 2001
1. Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements
have been prepared in accordance with accounting principles generally
accepted in the United States of America 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 accounting principles generally accepted in the United
States of America 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, 2001.
The results of operations for any interim period are not necessarily
indicative of the results to be expected for the full year.
2. 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 on going
evaluation by management.
3. Earnings Per Share
Basic earnings per share represents net earnings divided by the
weighted-average number of common shares outstanding for the period. Basic
and diluted earnings per share are the same for all periods presented as
the company has no potentially dilutive securities outstanding.
4. New Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board ("FSAB") issued
Statement of Financial Accounting Standards No. 141 (SFAS No. 141),
Business Combinations, and Statement of Financial Accounting Standards
No. 142 (SFAS No.142), Goodwill and Other Intangible Assets. In October
2001, the FASB issued Statement of Financial Accounting Standards No. 144
(SFAS No. 144), Accounting for the Impairment or Disposal of Long-Lived
Assets. These standards were effective for fiscal years starting after
December 15, 2001.
The Company adopted SFAS No. 141, 142 and 144 on January 1, 2002, however,
there was no effect on the Company's financial position or operating
performance.
5. Details of Inventory March 31, 2002 December 31, 2001
Raw Materials $ 5,390,000 $ 6,041,000
Work-in-Progress 2,111,000 1,363,000
Finished Goods 4,150,000 5,142,000
Total $11,651,000 $12,546,000
6. Discontinued Operations
In December 2001, the Company decided to discontinue its retail operations,
Price One RV in Mesa, Arizona. At the time of discontinuing the retail
operations, the remaining motorhome inventory was sold, at a discount, to
another dealership in Arizona. The fixed assets and parts inventory are
expected to be disposed of in 2002. The Company's financial statements for
the quarter ended March 31, 2001 have been restated to reflect the retail
segment as a discontinued operation.
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Following is summary financial information for the Company's discontinued
retail operations:
Three Months Ended
March 31, 2002 March 31, 2001
Net Sales $ --- $3,074,000
Loss from Discontinued Operations
before Income Taxes (6,000) (236,000)
Income Tax Benefit --- (93,000)
Net Loss from Discontinued
Operations ($ 6,000) ($ 143,000)
March 31, 2002 December 31, 2001
Cash $ 190,000 $ 90,000
Receivables, net 2,219,000 4,560,000
Inventories 8,000 34,000
Other Current Assets --- 5,000
Current Assets of Discontinued
Operations $2,417,000 $4,689,000
Property and Equipment at Cost
Net of Accumulated Depreciation $ 55,000 $ 158,000
Other Assets --- 2,000
Non-Current Assets of Discontinued
Operations $ 55,000 $ 160,000
Accounts Payable $ 29,000 $ 54,000
Notes Payable 2,233,000 4,455,000
Current Liabilities of
Discontinued Operations $2,262,000 $4,509,000
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, 2002 to the three months
ended March 31, 2001
<page>
Revenues - 2002 compared with 2001
Net revenues from continuing operations for the first quarter ended March
31, 2002 were $17,407,000 as compared to $15,310,000 for the first quarter
in 2001. This represents a 14% increase from the prior year. Net units
sold for the quarter ended March 31, 2002 were 216 compared to 194 for the
quarter ended March 31, 2001, an 11% increase. Wholesale shipments of the
Company's gas motorhomes were up 20%, while diesel shipments were down 11%
when compared to last year's first quarter. The increase in net revenues
is primarily attributable to an industry-wide increase in Class "A"
shipments of 12% when compared to last year. Management believes this
increase is a recognition of an improving economy, but does not know if it
will continue.
Gross Profit - 2002 compared with 2001
Gross profit from continuing operations increased to $2,078,000 from
$1,734,000 for the same quarter in 2001, which is an increase of $344,000
or 20%. Gross margin was 11.9% as compared to 11.3% last year. The
increase in gross margin was attributable to the increase in sales which
created a larger absorption base for manufacturing overhead which tends to
be less variable than direct materials and labor. Management expects the
margins to hold or improve, but there are no assurances due to the uncertain
direction of the RV industry fundamentals and competition within the
industry.
Selling, General, Administrative and Other Expenses - 2002 compared with 2001
Selling, General, Administrative and Other Expenses from continuing
operations increased by approximately $468,000 from the first quarter of
2001 to the first quarter of 2002. Selling, general, administrative and
other expenses increased to 10.1% as a percentage of sales when compared to
8.5% for the quarter ended March 31, 2001. The increase is primarily
related to an increase in warranty expense and a decrease in rental and
interest income.
Income Taxes - 2002 compared to 2001
Income tax expense from continuing operations was $126,000 for the quarter
ended March 31, 2002 as compared to $175,000 in the first quarter of 2001.
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, 2002,
the Company had working capital of $15,126,000, compared to $14,757,000 at
December 31, 2001. The $369,000 increase in working capital is primarily
due to a $2,291,000 increase in accounts receivable, a $2,859,000 decrease
in the chassis vendor line of credit partially offset by a $3,126,000
decrease in cash, an $895,000 decrease in inventory and a $773,000 increase
in other assets and liabilities.
Capital expenditures during the first quarter of 2002 were $129,000.
Management anticipates similar levels of capital expenditures for the
remaining quarters of 2002 related to efficiency improvement initiatives and
refurbishment of the production facilities and related production equipment.
Significant increases are expected to be incurred when the Company begins
construction of the new facility, which is anticipated in the fourth quarter
of this year.
As of March 31, 2002 the Company has a $2,500,000 line of credit with a bank
which can be used for working capital purposes secured by equipment,
inventory and receivables. The interest rate is the prime rate (4.75% at
March 31, 2002). The line expires on September 27, 2003. Under this line
of credit, $437,000 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 March 31, 2002, 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, 2002.
The Company has a line of credit with a chassis vendor, Ford Motor Credit
Company ("FMCC"), with a $5,000,000 limit. Borrowings under the line bear
interest at an annual rate of prime plus 1% (5.75% at March 31, 2002).
All borrowings are secured by the Ford merchandise. The outstanding balance
at March 31, 2002 was $194,000.
<page>
The Company anticipates that it will be able to satisfy its ongoing cash
requirements through 2002, 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 cyclical. Recent reports of
decreased consumer confidence may reduce future sales. Most of Rexhall's
competitors are substantially larger, and many of its suppliers and dealers
have greater economic power, so that the volume and prices of both supplies
and sales may be adversely affected by competitive action. 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.
PART II - OTHER INFORMATION
Repurchase Agreements - Motorhomes purchased by dealers, under financing
agreements with third party lenders, are subject to repurchase by the Company
under the terms of the financing, at dealer cost and might include unpaid
interest and other costs in the event of default by the dealer. During
the three months ended March 31, 2002 and 2001, the Company repurchased
approximately $1,266,000 and $641,000 respectively, (wholesale value) of
motorhomes under these agreements. At March 31, 2002 and 2001, approximately
$26,400,000 and $25,800,000, respectively, of dealer inventory was covered
by repurchase agreements. Dealers do not have the contractual right to
return motorhomes under any Rexhall Dealer Agreement. The repurchase
agreements require the dealers to default or file for bankruptcy. There are
also a number of states statutes which require the repurchasing of motorhomes
whenever a dealership is terminated.
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 should 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, thereunto duly authorized.
Rexhall Industries, Incorporated
(Registrant)
By /S/ William J. Rex By /S/ Dawn E. Diaz
(Signature and Title)* (Signature and Title)*
William J. Rex, President, CEO & Chairman Dawn E. Diaz, CFO
Date: May 14, 2002 Date: May 14, 2002
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 14, 2002
By /S/ Donald C. Hannay, Sr.
(Signature and Title)*
Donald C. Hannay, Sr.
Vice President of Sales & Marketing
Director
Date: May 14, 2002
By /S/ Robert A. Lopez
(Signature and Title)*
Robert A. Lopez
Director
Date: May 14, 2002
By /S/ Frank A. Visco
(Signature and Title)*
Frank A. Visco
Director
Date: May 14, 2002
By /S/ Dr. Dennis K. Ostrom
(Signature and Title)*
Dr. Dennis K. Ostrom
Director
Date: May 14, 2002