SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
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
(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 No x .
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: 6,114,700 as of
September 26, 2002.
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 (Restated)and December 31, 2002 3
Condensed Consolidated Statements of Operations for the
three months ended March 31, 2002 (Restated) and
March 31, 2001 4
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2002 (Restated) 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
PART III - EXHIBITS
Officer Certifications 11
The Company is filing this Amendment to its Quarterly Report on Form 10-Q
for the period ended March 31, 2002 filed with the Securities and Exchange
Commission on May 14, 2002 in order to revise the Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations sections in that Report. The Company has determined that its raw
materials inventory balance was incorrect. Related costs of goods sold and
certain bonus and tax accruals have also been restated to reflect this
inventory error. Accordingly, the Company is restating its 2002 First
Quarter Result. Pursuant to Rule 12B-15 under the Securities Exchange Act
of 1934, the Company is including the complete text of the Quarterly Report
as revised. Except for financial statement information and related
disclosures that are specifically related to the restatement all information
contained in this report and the Original Filing is stated as of the date of
the Original Filing.
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 (RESTATED)
(NOTE 2)
CURRENT ASSETS
Cash $ 5,536,000 $ 8,662,000
Accounts Receivables, net 4,342,000 2,051,000
Income Tax Receivable 951,000 786,000
Inventories 10,896,000 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 25,446,000 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 $31,445,000 $36,352,000
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 3,363,000 $ 3,423,000
Chassis Vendor Line of Credit 194,000 3,053,000
Notes Payable and Current Portion of
Long-Term Debt 35,000 34,000
Accrued Warranty 817,000 699,000
Accrued Legal 721,000 802,000
Accrued Dealer Incentives 1,101,000 1,139,000
Other Accrued Liabilities 1,779,000 1,376,000
Accrued Compensation and Benefits 482,000 367,000
Current Liabilities of Discontinued
Operations 2,262,000 4,509,000
TOTAL CURRENT LIABILITIES 10,754,000 15,402,000
Long-Term Debt, less Current Portion 662,000 671,000
TOTAL LIABILITIES 11,416,000 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
3,057,000 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 13,933,000 14,186,000
TOTAL STOCKHOLDERS'EQUITY 20,029,000 20,279,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $31,445,000 $36,352,000
See accompanying notes to condensed consolidated financial statements
REXHALL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended
March 31, 2002 March 31, 2001
(RESTATED)
(NOTE 2)
Net Revenues $17,407,000 $15,310,000
Cost of Sales 16,084,000 13,576,000
Gross Profit 1,323,000 1,734,000
Operating Expenses:
Selling, General, Administrative Expenses
and Other Expenses 1,741,000 1,297,000
Income (Loss) from Continuing Operations
before Income Taxes (418,000) 437,000
Income Tax Expense (Benefit) (165,000) 175,000
Income (Loss) from Continuing Operations (253,000) 262,000
Loss from Discontinued Operations
(net of applicable income tax benefit
of $93,000 in 2001) --- (143,000)
Net Income (Loss) ($ 253,000) $ 119,000
Basic and Diluted Income (Loss)
from Continuing Operations Per Share ($ .08) $ .09
Basic and Diluted Loss
from Discontinued Operations Per Share $ --- ($ .05)
Basic and Diluted Income (Loss) Per Share ($ .08) $ .04
Weighted Average Shares Outstanding
Basic and Diluted 3,057,000 3,057,000
See accompanying notes to condensed consolidated financial statements
REXHALL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31, 2002 March 31, 2001
(RESTATED)
CASH FLOWS FROM OPERATING ACTIVITIES: (NOTE 2)
Net income (Loss) ($ 253,000) $ 119,000
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
Operating Activities:
Net loss from discontinued operations --- 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 1,650,000 (1,076,000)
Income tax receivable (165,000) 175,000
Increase (decrease) in:
Accounts payable (60,000) 175,000
Accrued Warranty 118,000 (191,000)
Accrued legal (81,000) (44,000)
Accrued dealer incentives (38,000) 26,000
Other assets and liabilities 743,000 181,000
Net cash provided by (used in) operating
activities (316,000) 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 130,000 (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
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 disclosures 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. Restated Financial Statements
Subsequent to the filing of the Form 10-Q for the period ended March 31,
2002, the Company concluded that an incorrect number was recorded for its
raw material inventory for its first quarter of 2002, and it would need to
restate the financial information set forth therein. The Company's financial
statements as of March 31, 2002 have been restated to reflect the correct
raw material inventory balance, related cost of goods sold, and certain bonus
and tax accruals that are affected by this inventory error. The following
accounts are adjusted as a result of the restatement:
QUARTER ENDED
March 31,2002
Balance Sheet: As Previously Reported As Restated
Inventories $ 11,651,000 $ 10,896,000
Income Tax Receivable 660,000 951,000
Accrued Compensation and Benefits 512,000 482,000
Retained Earnings 14,367,000 13,933,000
Statement of Earnings:
Cost of Sales 15,329,000 16,084,000
Selling, General and Administrative
Expenses and Other Expenses 1,765,000 1,741,000
Income (Loss) from Continuing
Operations before Taxes 313,000 (418,000)
Income Tax Expense (Benefit) 126,000 (165,000)
Net Income (Loss) 181,000 (253,000)
Net Income (Loss) per Basic and
Diluted Share $ 0.06 ($ 0.08)
$6,000 of expenses in the first quarter related to the discontinued retail
operation have been reclassified from being previously reported as Loss from
Discontinued Operations to being included in Selling, General and
Administrative Expenses and Other.
3. 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.
4. 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.
5. Inventory March 31, 2002 December 31, 2001
(RESTATED)
(NOTE 2)
Raw Materials $ 4,635,000 $ 6,041,000
Work-in-Progress 2,111,000 1,363,000
Finished Goods 4,150,000 5,142,000
Total $10,896,000 $12,546,00
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. 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 --- (236,000)
Income Tax Benefit --- (93,000)
Net Loss from Discontinued Operations $ --- ($ 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.
The Company has restated its previously issued financial statements. See
note 2 to the financial statements for information regarding the restatement.
Accordingly, certain amounts included in Management's Discussion and Analysis
of Financial Condition and Results of Operations have been adjusted.
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
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.
Gross Profit - 2002 compared with 2001
Gross profit from continuing operations decreased to $1,323,000 from
$1,734,000 for the same quarter in 2001, which is an decrease of $411,000 or
24%. Gross margin was 7.6% in 2002 as compared to 11.3% in 2001. The
decrease in gross margin was primarily attributable to increases in material
cost and direct labor per unit and material obsolescence. This was partially
offset by lower manufacturing overhead cost and improved absorption due to
higher sales. 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 $444,000 from the first quarter of
2001 to the first quarter of 2002. Selling, general, administrative and
other expenses increased to 10.0% 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 benefit from continuing operations was $165,000 for the quarter
ended March 31, 2002 as compared to income tax expense of $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 $14,692,000, compared to $14,757,000 at
December 31, 2001. The $65,000 decrease in working capital is primarily due
to a $3,126,000 decrease in cash, an $1,650,000 decrease in inventory and a
$403,000 increase in other accrued liabilities partially offset by a
$2,291,000 increase in accounts receivable, a $2,859,000 decrease in the
chassis vendor line of credit.
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
that 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.
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.
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.
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.
The effect of restating the Company's financial position and results of
operations may be adverse for shareholders, including possible delisting of
the shares, which will seriously limit the marketability of shares and may
negatively affect the Company's business. 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 state statutes that 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.
The Company is restating its first quarter 10-Q to adjust inventory levels,
and the second quarter 10-Q was not filed timely. (See Note 2 of the Notes
to Condensed Consolidated Financial Statements.) The previously announced
independent review of the Company's accounting records has been completed
with no other errors found in the Company's financial statements for the
first and second quarters of 2002. However, NASDAQ held a hearing with the
Company's Management on September 20, 2002 to consider whether the Company
can continue to list its shares with that exchange in view of its restatement
and late filing. The Company cannot predict the outcome of this hearing, but
it expects to be notified of the decision within seven to ten days. The
Company estimates the accounting and legal fees and costs related to the
review of the Company's financial statements to be approximately $600,000
or more, which will be recorded in the third quarter.
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/ J. Michael Bourne
(Signature and Title)* (Signature and Title)*
William J. Rex, J. Michael Bourne,
President, CEO & Chairman Executive Vice President, COO & CFO
Date: September 26, 2002 Date: September 26, 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: September 26, 2002
By /S/ J. Michael Bourne
(Signature and Title)*
J. Michael Bourne
Executive Vice President, COO & CFO
Director
Date: September 26, 2002
By /S/ Robert A. Lopez
(Signature and Title)*
Robert A. Lopez
Director
Date: September 26, 2002
By /S/ Frank A. Visco
(Signature and Title)*
Frank A. Visco
Director
Date: September 26, 2002
By /S/ Dr. Dennis K. Ostrom
(Signature and Title)*
Dr. Dennis K. Ostrom
Director
Date: September 26, 2002
PART III - EXHIBITS
CERTIFICATIONS
I, William J. Rex, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Rexhall
Industries, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
Date: September 26, 2002 William J. Rex
President, Chairman and Chief Executive Officer
I, J. Michael Bourne, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Rexhall
Industries, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
Date: September 26, 2002 J. Michael Bourne
Executive Vice President, Chief Operating Officer,
and Acting Chief Financial Officer