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 Quarterly Period Ended September 30, 1996 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) (805) 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: 2,636,030 as of 9/30/96. REXHALL INDUSTRIES, INC. INDEX PART 1 - FINANCIAL INFORMATION PAGE NUMBER Item 1. Financial Statements: Condensed Balance Sheets at September 30, 1996 (unaudited) 3 and December 31, 1995 Condensed Statements of Operations for the three and nine months ended September 30,1996 (unaudited) and September 30, 1995 (unaudited) 4, 5 Condensed Statements of Cash Flows for the nine months ended September 30, 1996 (unaudited) and September 30, 1995 (unaudited) 6 Notes to Condensed Financial Statements as of September 30, 1996 (unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8, 9 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 10 Reports on Form 8-K. No reports on Form 8-K have been filed during the quarter for which this report is filed Signatures 10 Exhibits Exhibit 11 - Computation supporting earnings per common and common equivalent share amount 11 Exhibit 27 - Financial Data Sheet Submitted via Edgar Electronic Filing System 12 (Audited) (Unaudited) December 31 September 30 PART I - FINANCIAL INFORMATION 1995 1996 Item 1. - Financial Statements REXHALL INDUSTRIES, INC. CONDENSED BALANCE SHEETS Assets: Current Assets Cash $1,998,000 $ 373,000 Accounts Receivable 5,063,000 5,795,000 Inventories 8,651,000 14,097,000 Other Current Assets 163,000 45,000 Deferred Income Taxes 286,000 279,000 Total Current Assets 16,161,000 20,589,000 Property and Equipment - Net 3,807,000 4,480,000 Other Assets 7,000 7,000 TOTAL ASSETS $19,975,000 $25,076,000 Liabilities and Shareholders' Equity: Current Liabilities Accounts Payable $5,747,000 $9,227,000 Warranty Allowance 311,000 158,000 Reserve for Self-Insurance 365,000 327,000 Other Accrued Liabilities 445,000 504,000 Current Portion of long-term debt 24,000 24,000 Total Current Liabilities 6,892,000 10,240,000 Deferred Income Tax Liabilities 6,000 -0- Long-term debt 852,000 832,000 Total Liabilities 7,750,000 11,072,000 Shareholders' Equity: Preferred Stock - no par value; Authorized 1,000,000 shares; no shares outstanding at September 30, 1996 and December 31, 1995 Common Stock - no par value; Authorized 10,000,000 shares; Issued & outstanding 2,636,030 shares at Sept. 30, 1996 and 2,501,000 shares at December 31, 1995 6,461,000 6,479,000 Retained Earnings 5,764,000 7,525,000 Total Shareholders' Equity 12,225,000 14,004,000 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $19,975,000 $25,076,000 PART I - FINANCIAL INFORMATION Item 1. - Financial Statements REXHALL INDUSTRIES, INC. CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Sept. 30, 1995 Sept. 30, 1996 Sales $15,509,000 $17,431,000 Cost of Sales 13,513,000 15,008,000 Gross Profit 1,996,000 2,423,000 Selling, General, Administrative Expenses and Other Expenses 1,176,000 1,628,000 Income Before Taxes 820,000 795,000 Income Taxes 328,000 318,000 Net Income 492,000 477,000 Net Income Per Common Share $ .19(1) $ .18 Weighted Average Number of Common Shares Outstanding (primary) 2,636,050(2) 2,723,619 1) Net income per common share originally reported as .20. However, considering the 5% stock dividend paid on 4/17/96, the figure has been adjusted to reflect the divided in order to equitably compare like quarters. 2) Weighted average number of common shares outstanding was originally reported as 2,501,000. Considering the 4/17/96 5% dividend, the number indicated above reflects such dividend. page> PART I - FINANCIAL INFORMATION Item 1. - Financial Statements REXHALL INDUSTRIES, INC. CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) Nine Months Ended Sept. 30, 1995 Sept. 30, 1996 Sales $ 46,067,000 $51,281,000 Cost of Sales 39,498,000 43,391,000 Gross Profit 6,569,000 7,890,000 Selling, General, Administrative Expenses and Other Expenses 3,939,000 4,947,000 Income Before Taxes 2,630,000 2,943,000 Income Taxes 1,052,000 1,177,000 Net Income $1,578,000 $1,766,000 Net Income Per Common Share $ .60(1) $ .65 Weighted Average Number of Common Shares Outstanding 2,636,050(2) 2,723,619 1) Net income per common share originally reported as .63. However, considering the 5% stock dividend paid on 4/17/96, the figure has been adjusted to reflect the dividend in order to equitably compare like quarters. 2) Weighted average number of common shares outstanding was originally reported as 2,501,000. Considering the 4/17/96 5% dividend, the number indicated above reflects such dividend. PART I - FINANCIAL INFORMATION Item 1. - Financial Statements REXHALL INDUSTRIES, INC. CONDENSED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1996 (unaudited) 1995 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 1,578,000 $ 1,762,000 Adjustments to reconcile net income to net cash provided(used)by operating activities: Depreciation and amortization 56,000 102,000 (Increase) in accounts receivable (209,000) (732,000) (Increase) in inventories (1,775,000) (5,446,000) Increase(Decrease) in other current assets 60,000 (32,000) (Decrease)Increase in accounts payable (104,000) 3,480,000 Increase(Decrease) in reserve for self insurance 81,000 (38,000) Increase (Decrease) in reserve for warranty 45,000 (106,000) Increase in other current liabilities 118,000 242,000 Net cash used by operating activities (150,000) (768,000) CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (928,000) (855,000) Net cash used in investing activities (928,000) (855,000) CASH FLOWS FROM FINANCING ACTIVITIES: (Repurchase)Issuance of Common Stock (185,000) 18,000 Repayment of long-term debt -0- (20,000) Net cash used in financing activities (185,000) (2,000) NET DECREASE IN CASH AND CASH EQUIVALENTS (1,263,000) (1,625,000) BEGINNING CASH 2,518,000 1,998,000 ENDING CASH $ 1,255,000 $ 373,000 PART I - FINANCIAL INFORMATION Item 1. REXHALL INDUSTRIES, INC. Notes to the Condensed Financial Statements (Unaudited) September 30, 1996 1. The accompanying condensed 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. Prior period financial statements have been reclassified to conform with current period financial statement presentation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. 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, 1995. The Results of Operations for any interim period are not necessarily indicative of the results to be expected for the full year. 2. Detail of Inventory December 31, 1995 September 30, 1996 (Audited) (Unaudited) Raw Material $ 4,412,000 $ 8,677,000 Work in Process 1,459,000 1,608,000 Finished Motorhomes 2,780,000 3,812,000 TOTAL $ 8,651,000 $ 14,097,000 3. On 4/17/96 the Board of Directors approved and issued a 5% common stock dividend to owners of record as of April 3, 1996. The earnings per share data has been adjusted in order to equitably compare like quarters. PART I - FINANCIAL INFORMATION Item 2. - Management Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Sales - 3rd Quarter 1996 Compared with 1995 3rd Quarter Sales for the quarter ended September 30, 1996, totaled $17,431,000 as compared to $15,509,000 for the quarter ended September 30, 1995. The units sold in 1996 were 312 vs. 292 in 1995. Management believes that the increase in Sales is primarily due to continued expansion of Rexhall's dealer network, as well as the increased awareness of both dealers and customers to Rexhall's uniqueness with respect to manufacturing process, quality of materials and an ongoing product improvement and refinements. Gross Profit - 1996 3rd Quarter compared with 1995 3rd Quarter Gross Profit for the 3rd quarter of 1996 increased to 13.9% from 12.9% for the 3rd quarter of 1995. This increase was primarily due to the new California facility, which lowered factory overhead. Selling, General Administrative and Other Expenses - 3rd Quarter 1996 compared with 1995 3rd Quarter Selling, General Administrative and Other Expenses were 9.3% of Sales in 1996 as compared to 7.6% in the 3rd quarter of 1995. Increase in expenses are attributed to interest reimbursements to dealers, spiffs to dealers' sales people, sales commission, show rental expenses and legal fees for litigation. PART I - FINANCIAL INFORMATION Item 2. - Management Discussion and Analysis of Financial Condition and Result of Operations. Financial Condition, Capital Resources and Liquidity At September 30, 1996, working capital was $10,349,000 as compared to working capital of $9,379,000 at December 31, 1995. At present, the Company has a $3,500,000 line of credit with Bank of America which can be used for working capital purposes. On September 30, 1996, the company had used $401,000 under this line of credit to obtain a Letter of Credit permitting the company to remain self-insured for Workers' Compensation. The $3,500,000 line replaced the $2,000,000 credit line we maintained with Wells Fargo Bank. Under the third quarter market conditions, the company decided to borrow against its line of credit an additional $1,500,000 to maintain inventory levels. This short term liability was indemnified in the beginning of the 4th quarter. 1996 cash acquisitions which include the purchase and building of the new California facilities and purchase of the Indiana R.V. Service Center, along with increased inventory level have led to a temporary use of the credit line. Management believes that inventory reduction will start with the largest R.V. trade show in Louisville, Kentucky coupled with on going dealers expansion. Notably, Rexhall's current ratio of assets to liabilities remain an impressive 2 to 1. PART II - OTHER INFORMATION Item 6. - Exhibits and Reports on Form 8-K a) Exhibit 11. Statement re:computation of per share earnings. b) Reports on Form 8-K. No reports on Form 8-K have been filed during the quarter for which this report is filed. 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, INC. by (Registrant) Date: November 14, 1996 /S/William J. Rex William J. Rex Chairman, President and Chief Executive Officer Date: November 14, 1996 /S/Carmen Ignacio Carmen Ignacio Controller <page Exhibit 11. Computation Supporting Earnings per Common Share Third Quarter 1995 1996 Net Income (Loss) $ 492,000 $ 477,000 Weighted Average Number of Shares Outstanding 2,636,050(1) 2,723,619 Earnings (Loss) per Share $ .19 $ .18 (1) Originally reported as 2,501,000 shares outstanding and earnings per share to be at .20. However, considering the 5% stock dividend paid on 4/17/96, the figures have been adjusted to reflect the divided in order to equitably compare like quarters.