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, 1997 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: 2,767,806 as of 9/30/97. REXHALL INDUSTRIES, INC. INDEX PART 1 - FINANCIAL INFORMATION PAGE NUMBER Item 1. Financial Statements: Condensed Balance Sheets at September 30, 1997 3 and December 31, 1996 Condensed Statements of Operations for the three and nine months ended September 30,1997 and September 30, 1996 4, 5 Condensed Statements of Cash Flows for the nine months ended September 30, 1997 and September 30, 1996 6 Notes to Condensed Financial Statements as of September 30, 1997 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8, 9 PART II - OTHER INFORMATION Item 1. Exhibits and Reports on Form 8-K 10 Form 8-K has 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 1996 1997 Item 1. - Financial Statements REXHALL INDUSTRIES, INC. CONDENSED BALANCE SHEETS Assets: Current Assets Cash $742,000 $1,043,000 Accounts Receivable 3,208,000 6,474,000 Inventories 13,793,000 13,438,000 Other Current Assets 151,000 166,000 Income Tax Receivable 271,000 -0- Deferred Income Taxes 439,000 439,000 Total Current Assets 18,604,000 21,560,000 Property and Equipment - Net 4,885,000 5,108,000 Other Assets 7,000 7,000 TOTAL ASSETS $23,496,000 $26,675,000 Liabilities and Shareholders' Equity: Current Liabilities Accounts Payable $7,591,000 $8,665,000 Warranty Allowance 355,000 321,000 Reserve for Self-Insurance 365,000 420,000 Other Accrued Liabilities 748,000 1,524,000 Current Portion of long-term debt 26,000 26,000 Total Current Liabilities 9,085,000 10,956,000 Deferred Income Tax Liabilities 4,000 -0- Long-term debt 826,000 805,000 Total Liabilities 9,915,000 11,761,000 Shareholders' Equity: Preferred Stock - no par value; Authorized 1,000,000 shares; no shares outstanding at September 30, 1997 and December 31, 1996 Common Stock - no par value; Authorized 10,000,000 shares; Issued & outstanding 2,767,806 shares at Sept. 30, 1997 and 2,630,030 shares at December 31, 1996 6,553,000 6,376,000 Retained Earnings 7,048,000 8,538,000 Total Shareholders' Equity 13,581,000 14,914,000 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $23,496,000 $26,675,000 PART I - FINANCIAL INFORMATION Item 1. - Financial Statements REXHALL INDUSTRIES, INC. CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) Three Months Ended Sept. 30, 1996 Sept. 30, 1997 Sales $17,431,000 $15,997,000 Cost of Sales 15,008,000 13,817,000 Gross Profit 2,423,000 2,180,000 Selling, General, Administrative Expenses and Other Expenses 1,628,000 1,705,000 Income Before Income Taxes 795,000 475,000 Income Taxes 318,000 146,000 Net Income 477,000 329,000 Net Income Per Common Share $ .17(1) $ .12 Weighted Average Number of Common Shares Outstanding (primary) 2,859,800(2) 2,756,719 (1) Net Income per common share originally reported as .18. However, considering the 5% stock dividend paid on 5/26/97, 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 2,712,918. Considering the 5/26/97 5% dividend, the number indicated above reflects such dividend. PART I - FINANCIAL INFORMATION Item 1. - Financial Statements REXHALL INDUSTRIES, INC. CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) Nine Months Ended Sept. 30, 1996 Sept. 30, 1997 Sales $51,281,000 $49,877,000 Cost of Sales 43,391,000 42,665,000 Gross Profit 7,890,000 7,212,000 Selling, General, Administrative Expenses and Other Expenses 4,947,000 4,686,000 Income Before Income Taxes 2,943,000 2,526,000 Income Taxes 1,177,000 1,036,000 Net Income $1,766,000 $1,490,000 Net Income Per Common Share $ .62(1) $ .54 Weighted Average Number of Common Shares Outstanding 2,859,800(2) 2,756,179 (1) Net income per common share originally reported as $.65. However, considering the 5% stock dividend paid on 5/26/97, the figure has been adjusted to reflect the dividend in order to equitable compare like quarters (2) Weighted average number of common shares outstanding was originally reported as 2,732,619. Considering the 5/26/97 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, 1996 AND 1997 1996 1997 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 1,762,000 $1,490,000 Adjustments to reconcile net income to net cash provided(used)by operating activities: Depreciation and amortization 102,000 222,000 (Increase) in accounts receivable (732,000) (3,266,000) (Increase) in inventories (5,446,000) 355,000 Increase(Decrease) in other current assets (32,000) (15,000) Increase(Decrease) in income tax receivable -0- 271,000 (Decrease)Increase in accounts payable 3,480,000) 1,075,000 Increase(Decrease) in reserve for self insurance (38,000) 55,000 Increase (Decrease) in other liability including warranty (106,000) (35,000) (Increase)Decrease in deferred tax liabilities -0- (4,000) Increase in other current liabilities 242,000 776,000 Net cash (used in) provided by operating activities (768,000) 924,000 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (855,000) (445,000) Net cash used in investing activities (855,000) (445,000) CASH FLOWS FROM FINANCING ACTIVITIES: (Repurchase)Issuance of Common Stock 18,000 (157,000) Repayment of long-term debt (20,000) (21,000) Net cash (used in) financing activities (2,000) (178,000) NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS (1,625,000) 301,000 BEGINNING CASH 1,998,000 742,000 ENDING CASH $ 373,000 $1,043,000 PART I - FINANCIAL INFORMATION Item 1. REXHALL INDUSTRIES, INC. Notes to the Condensed Financial Statements (Unaudited) September 30, 1997 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, 1996. 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, 1996 September 30, 1997 Raw Material $ 6,608,000 $ 7,707,000 Work in Process 2,753,000 2,038,000 Finished Motorhomes 4,432,000 3,693,000 TOTAL $13,793,000 $13,438,000 3. Cash in Bank 742,000 1,043,000 $ 742,000 $ 1,043,000 4. On 5/26/97 the Board of Directors approved and issued a 5% common stock dividend to owners of record as of May 12, 1997. 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 1997 Compared with 1996 3rd Quarter Sales for the quarter ended September 30, 1997, totaled $15,997,000 as compared to $17,431,000 for the quarter ended September 30, 1996. The units sold in 1997 were 275 vs. 312 in 1996. The decrease in sales was due to the continuing restructuring of the Indiana plant. Cost of Sales - 3rd Quarter 1997 compared with 3rd Quarter 1996 The cost of sales as a percentage of sales for the third quarter of 1997 was 86.4% vs 86.0% in the third quarter of 1996. The cost of sales percentage for 1997 increased due to cost absorption of product improvements. Gross Profit - 1997 3rd Quarter compared with 1996 3rd Quarter Gross Profit for the 3rd quarter of 1997 decreased to 13.6% from 13.9% for the 3rd quarter of 1996. This decrease was due to the decline in sales discussed in sales and cost of sales above. Selling, General Administrative and Other Expenses - 3rd Quarter 1997 compared with 1996 3rd Quarter Selling, General Administrative and Other Expenses were 10.7% of Sales in 1997 as compared to 9.3% in the 3rd quarter of 1996. Increase in expenses are attributed to interest reimbursements to dealers, spiffs to dealers' sales people and show rental expenses. 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, 1997, working capital was $10,581,000 as compared to working capital of $9,519,000 at December 31, 1996. At present, the Company has a $3,500,000 line of credit with Bank of America which can be used for working capital purposes. At September 30, 1997, the company had used $365,000 under this line of credit to obtain a Letter of Credit permitting the company to remain self-insured for Workers' Compensation. 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 1. - Exhibits and Reports on Form 8-K a) Exhibit 11. Statement re:computation of per share earnings. b) Reports on Form 8-K. The following reports, Form 8-K, have been filed. Form 8-K 7/21/97 Form 8-K 8/28/97 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, 1997 /S/William J. Rex William J. Rex Chairman, President and Chief Executive Officer Date: November 14, 1997 /S/Phillip J. Parks Phillip J. Parks Controller Exhibit 11. Computation Supporting Earnings per Common Share Third Quarter 1996 1997 Net Income (Loss) $ 477,000 $ 329,000 Weighted Average Number of Shares Outstanding 2,859,800 2,756,719 Earnings (Loss) per Share $ .17(1) $ .12 (1) Originally reported as 2,723,619 shares outstanding and earnings per share to be at .18. However, considering the 5% stock dividend paid on 5/26/97, the figures have been adjusted to reflect the dividend in order to equitably compare like quarters.