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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
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Exchange Act of 1934
For the quarterly period ended March 31, 2000 or
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_____ Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________________ to ______________________
Commission file number 1-5654
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EXX INC
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(Exact Name of Registrant as Specified in Its Charter)
Nevada 88-0325271
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
1350 East Flamingo Road, Suite 689, Las Vegas, Nevada 89119-5263
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(Address or Principal Executive Offices) (Zip Code)
(702) 598-3223
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(Registrant's Telephone Number, Including Area Code)
NONE
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(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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
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Number of shares of common stock outstanding as of March 31, 2000:
12,061,607 Class A Shares and 624,953 Class B Shares.
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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A. BALANCE SHEETS
March 31, 2000 December 31, 1999
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(unaudited) (audited)
ASSETS
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CURRENT ASSETS:
Cash and cash equivalents $ 2,283,000 $ 2,315,000
Short-term investments 4,538,000 3,999,000
Accounts receivable, less
allowances of $84,000
and $84,000 3,309,000 3,357,000
Inventories, at lower of cost
or market:
Raw materials 486,000 890,000
Work in process 111,000 180,000
Finished goods 2,846,000 1,921,000
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3,443,000 2,991,000
Other current assets 579,000 349,000
Refundable income taxes -- 111,000
Deferred income taxes 787,000 953,000
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TOTAL CURRENT ASSETS 14,939,000 14,075,000
Property, plant and equipment,
at cost:
Land 41,000 41,000
Buildings and improvements 2,987,000 2,987,000
Machinery and equipment 6,559,000 6,484,000
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9,587,000 9,512,000
Less accumulated depreciation
and amortization 7,255,000 7,187,000
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2,332,000 2,325,000
Long Term Investments 1,371,000 1,620,000
Other assets 171,000 375,000
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TOTALS $18,813,000 $18,395,000
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SEE NOTES TO FINANCIAL STATEMENTS
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A. BALANCE SHEETS (continued)
March 31, 2000 December 31, 1999
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(unaudited) (audited)
LIABILITIES
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CURRENT LIABILITIES:
Notes payable - current portion $ 59,000 $ 59,000
Accounts payable and other
current liabilities $ 3,496,000 $ 3,988,000
Income taxes payable 77,000 --
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TOTAL CURRENT LIABILITIES 3,632,000 4,047,000
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LONG-TERM LIABILITIES:
Notes payable, less current portion 1,676,000 1,688,000
Pension liability 576,000 576,000
Deferred tax liability 561,000 646,000
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2,813,000 2,910,000
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STOCKHOLDERS' EQUITY
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Preferred stock, $.01 par value;
authorized 5,000,000 shares;
Common stock, Class A $.01 par value,
authorized 25,000,000 shares;
12,061,607 shares issued 121,000 177,000
Common stock, Class B $.01 par value,
authorized 1,000,000 shares;
624,953 shares issued 6,000 9,000
Capital in excess of par value 2,670,000 3,844,000
Accumulated other comprehensive loss (220,000) (378,000)
Retained earnings 9,791,000 9,019,000
Less Treasury Stock at cost: -- (1,233,000)
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TOTAL STOCKHOLDERS' EQUITY 12,368,000 11,438,000
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TOTALS $18,813,000 $18,395,000
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SEE NOTES TO FINANCIAL STATEMENTS
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B. STATEMENTS OF INCOME
For the Three-Month Period Ended
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March 31, 2000 March 31, 1999
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Net sales $ 5,420,000 $ 5,470,000
Cost of sales 3,258,000 3,593,000
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Gross profits 2,162,000 1,877,000
Selling, general and
administrative expenses 1,062,000 1,126,000
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Operating income (loss) 1,100,000 751,000
Interest expense 25,000 42,000
Other income 95,000 156,000
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Income before provision
for income taxes 1,170,000 865,000
Provision for income taxes 398,000 294,000
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Net income $ 772,000 $ 571,000
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Net income per common share
Basic $ .06 $ .04
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Diluted $ .06 $ .04
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Weighted average shares outstanding
Basic 12,686,560 13,476,280
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Diluted 13,788,832 13,476,280
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SEE NOTES TO FINANCIAL STATEMENTS
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C. STATEMENTS OF CASH FLOW
For the Three-Month Period Ended
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March 31, 2000 March 31,1999
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Operating activities:
Net income $ 772,000 $ 571,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and Amortization 68,000 63,000
Deferred income taxes -- --
Provision for bad debts -- 9,000
Accrued interest income (51,000) (48,000)
Increase (decrease) in cash attributable to changes in
assets and liabilities:
Accounts receivable 48,000 (770,000)
Inventories (452,000) 128,000
Other current assets (230,000) (318,000)
Refundable income taxes 111,000 --
Other assets 204,000 76,000
Accounts payable and other
current liabilities (492,000) 87,000
Income taxes payable 77,000 --
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Net cash provided by (used in) operating activities 55,000 (202,000)
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Cash flows from investing activities:
Purchase of property and equipment (75,000) (73,000)
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Net cash provided by (used in) investing activities (75,000) (73,000)
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Cash flows (used in) financing activities:
Payments on notes payable (12,000) (12,000)
Purchases of Treasury Stock -- (65,000)
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Net cash (used in) financing activities (12,000) (77,000)
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Net increase (decrease) in cash and cash equivalents (32,000) (352,000)
Cash and cash equivalents
beginning of period 2,315,000 3,383,000
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Cash and cash equivalents,
end of period $2,283,000 $3,031,000
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SEE NOTES TO FINANCIAL STATEMENTS
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C. STATEMENTS OF CASH FLOW (continued)
For the Three-Month Period Ended
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March 31, 2000 March 31,1999
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash Paid during the year for:
Interest $ 25,000 $ 42,000
Income taxes 16,000 203,000
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
NONE
SEE NOTES TO FINANCIAL STATEMENTS
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D. NOTES TO FINANCIAL STATEMENTS
Note 1: The unaudited financial statements as of March 31, 2000 and 1999
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reflect all adjustments which are necessary in the opinion of management for
a fair presentation of the results for the periods stated. All adjustments so
made are of a normal recurring nature. Certain financial information and
footnote disclosure normally included in financial statements in accordance
with generally accepted accounting principles have been condensed or omitted.
The reader is referred to the audited consolidated financial statements and
notes thereto included in the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1999.
Note 2: Notes Payable
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Notes Payable represents obligations of the Handi-Pac subsidiary as
follows:
March 31, 2000
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Notes Payable - SBA Loans $ 888,000
Capital Lease payable 847,000
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1,735,000
Current Portion of Long-Term Debt 59,000
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$1,676,000
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During the first quarter 1998, the Company opened a limited credit
facility with a bank for two subsidiaries which includes a $300,000 sub-limit
for direct borrowings and a $150,000 sub-limit for documentary letters of
credit all secured by certain of the Company's money market funds.
As of March 31, 2000, there was no other bank debt for the other
subsidiaries except as noted above.
Note 3: Effective March 30, 1998, options to purchase 1,900,000 shares of
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Class A and 100,000 shares of Class B stock were issued to the Chief
Executive Officer in accordance with an agreement between the Company and the
Chief Executive Officer canceling the officer's right to have the Company
purchase all or any part of the shares of the Company owned by the Chief
Executive Officer and/or members of his family. Please refer to footnote 12
in the 10K report for the year ended December 31, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
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Note 4: Stock Dividend
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Effective March 8, 2000, the Company paid a 400% stock dividend to
all shareholders of the Company's Class A and B common stock of record as of
December 16, 1999. The dividend was four shares of the Company's Class A
common stock for each share of Class A and/or Class B common stock owned by a
shareholder. All transactions and disclosures in the consolidated financial
statements, related to the Company's Class A and Class B common stock have
been restated to reflect the effects of the stock dividend. In addition, at
the time of this transaction, the Company retired the Treasury Stock in its
possession, namely 5,591,407 Class A shares and 304,153 Class B shares.
Note 5: Comprehensive Income
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Comprehensive Income is as follows:
For the Three-Month Period Ended
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March 31, 2000 March 31, 1999
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Net income $772,000 $ 571,000
Unrealized gains (losses) on debt
securities net of taxes: 158,000 (208,000)
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Comprehensive Income $930,000 $ 363,000
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SEE NOTES TO FINANCIAL STATEMENTS
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Note 6: The following information is reported as required for industry
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segment disclosure.
Three Months Ended March 31, 2000
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Mechanical
Toy Equipment Consolidated
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Sales $1,828,000 $3,592,000 $5,420,000
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Operating income $ 239,000 $ 995,000 $1,234,000
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General corporate expenses 134,000
Interest expense 25,000
Interest income 87,000
Other income 8,000
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Income before income taxes $1,170,000
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Three Months Ended March 31, 1999
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Mechanical
Toy Equipment Consolidated
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Sales $2,342,000 $3,128,000 $5,470,000
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Operating income $ 248,000 $ 638,000 $ 886,000
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General corporate expenses 136,000
Interest expense 42,000
Interest income 107,000
Other income 50,000
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Income before income taxes $ 865,000
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SEE NOTES TO FINANCIAL STATEMENTS
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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AND RESULTS OF OPERATIONS
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The following management's discussion and analysis of results of
operations and financial condition contains certain forward-looking
statements which are covered under the safe harbor provisions of the Private
Securities Legislation Reform Act of 1995 with respect to the Company's
future financial performance. Although EXX INC believes the expectations
reflected in such forward-looking statements are based on reasonable
assumptions, it can give no assurance that its expectations will be realized.
Forward-looking statements involve known and unknown risks which may cause
EXX INC's actual results and corporate developments to differ materially from
those expected. Factors that could cause results and developments to differ
materially from EXX INC's expectations include, without limitation, changes
in manufacturing and shipment schedules, delays in completing plant
construction and acquisitions, new product and technology developments,
competition within each business segment, cyclicality of the markets for the
products of a major segment, litigation, significant cost variances, the
effects of acquisitions and divestitures, and other risks.
A. Results of Operations
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Sales for the first quarter of 2000 were $5,420,000 compared
to $5,470,000 in 1999, a 1% decrease. The Mechanical Equipment Group had
total sales of $3,592,000, which was an increase of $464,000 or 15% greater
than the prior year's $3,128,000. The Toy Segment reflected a sales decrease
of 22% to $1,828,000 from $2,342,000 in 1999.
Gross profits for the first quarter 2000 totaled $2,162,000
compared to $1,877,000 for the comparable period in 1999. While gross profits
in the Toy division declined between the periods, the Mechanical Equipment
Group accounted for the net increase. Gross profits as a percentage of sales
increased to 40% compared to last year's 34% because of a higher gross profit
percentage earned by the Mechanical Equipment Group.
The declining trend of the Toy Segment sales continues as with
the industry. Management continues to face the same challenges of
maintaining market share in light of increasing product and other related
costs and of reviewing personnel demands and product mix and seeking new
competitive items in light of these facts.
First quarter sales of the Mechanical Equipment group show
increased levels especially in the telecommunications area with the motor
group maintaining its market share. New product acceptance remains a primary
goal in competing in a limited market area.
Operating income was $1,100,000 in the first quarter of 2000
compared to an operating income of $751,000 during the first quarter of
1999. The increase in operating income was due primarily to improvements in
operations of the Mechanical Equipment Group.
Interest expense was $25,000, compared to $42,000 the same
period last year.
The net income for the first quarter of 2000 was $772,000 or 6
cents per share (basic and diluted) compared to a net income of $571,000 or 4
cents per share (basic and diluted) in the comparable period of 1999.
SEE NOTES TO FINANCIAL STATEMENTS
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B. Liquidity and Capital Resources
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For the three months ended March 31, 2000, the Company generated
$55,000 from operating activities as compared to a use of $202,000 in the
corresponding period of the preceding year. The principal reason for the
increased cash flow in 2000 is the increased net income in the 2000 period.
For the three months ended March 31, 2000, the Company used $75,000 for
investing activities, principally for the purchase of equipment. In the
corresponding period of the preceding year, the Company used $73,000 for
investing activities, principally for the purchase of equipment. Cash flows
totaling $12,000 used in financing activities during the three months
ended March 31, 2000 was for the payment of notes payable compared to $77,000
for the three months ended March 31, 1999 which related mostly to the
purchase of treasury stock.
At March 31, 2000, the Company had working capital of
approximately $11,307,000 and a current ratio of 4.1 to 1. In addition, as
described in Notes to Financial Statements, the Registrant's Handi-Pac
subsidiary has $888,000 of long-term debt outstanding with the SBA. During
the first quarter 1998, the Company opened a limited credit facility with a
bank for two subsidiaries which includes a $300,000 sub-limit for direct
borrowings and a $150,000 sub-limit for documentary letters of credit all
secured by certain of the Company's money market funds. The Registrant
considers its working capital, as described above, to be more than adequate
to handle its current operating capital needs.
PART II. OTHER INFORMATION
Not applicable.
SIGNATURE
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.
EXX INC
By: /s/ David A. Segal
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David A. Segal
Chairman of the Board
Chief Executive Officer
Chief Financial Officer
Date: May 12, 2000
SEE NOTES TO FINANCIAL STATEMENTS
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