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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------
FORM 10-K
(Mark One)
[x] Annual report under section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required]
For the fiscal year ended December 31, 2000
OR
[ ]Transition report pursuant to section 13 or 15(d) of the
Securities Exchange Act of 1934 [No fee required]
(No fee required)
For the Transition period from to
Commission file number: 0-10067
_________________________________
REXHALL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
California 95-4135907
(State or other jurisdiction of
Incorporation or organization) (IRS Employer Identification No.)
46147 7th Street West
Lancaster, CA 93534
(Address of principal executive offices)
Registrant's telephone number, including area code: (661) 726-0565
Securities registered pursuant to Section 12(b) of the Act: None
Name of each exchange on which registered: NASDAQ Stock Market
Securities registered pursuant to Section 12(g) of the Act: Common Stock, no
par value
Indicate by check mark whether the registrant (1) 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 periods as 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
As of March 29, 2001 the aggregate market value of voting stock held by
non-affiliates was approximately $6,689,500. Shares of common stock held
by each officer, director and holder of 5% or more of the outstanding Common
Stock of the Registrant have been excluded in that such persons may be deemed
to be affiliates. Total shares of common stock held by those deemed to be
affiliates at March 29, 2001 totaled 1,649,000. This determination of
affiliate status is not necessarily a conclusive determination of other
purposes.
As of March 29, 2001 there were 3,057,350 shares of the Registrant's common
stock outstanding.
PART I
Item 1. Business
Rexhall Industries, Inc. (the "Company") designs, manufactures and sells
Class A motorhomes. Class A motorhomes are self-contained and self-powered
recreational vehicles used primarily in conjunction with leisure travel and
outdoor activities. In June 2000, the Company incorporated a wholly-owned
subsidiary, Price I, Inc., dba, Price One RV, to operate a retail dealership
for Class A motorhomes and other similar products. As used herein, the
"Company" refers to Rexhall Industries, Inc. and subsidiary and the
predecessor partnership.
The Company produces all of its products from its manufacturing facility
in Lancaster, California, which also serves as its Corporate Headquarters.
Class A Motorhomes
Based upon industry standards established by the Recreation Vehicle
Industry Association ("RVIA"), the Company manufactures certain product lines
classified as conventional or class A motorhomes.
Conventional or class A motorhomes are self-powered vehicles built on a
motor vehicle chassis, with engine and drive train components which are
supplied by a motor vehicle manufacturer (i.e. Ford, Workhorse Custom Chassis
LLC (formerly GM), and Spartan). The interior of the vehicle typically
includes a driver's area, kitchen, bathroom, dining and sleeping areas.
Class A motorhomes are self-contained with their own lighting, heating,
cooking and refrigeration facilities, waste disposal and water storage tanks,
permitting occupancy without requiring connection to utilities. While not
designed or intended as permanent housing, Class A motorhomes do provide
comfortable living quarters for short periods, particularly for people
interested in travel and outdoor recreational activities.
Class A motorhomes are different from mobile homes, which are
manufactured housing designed for permanent or semi-permanent residential
dwelling and, although movable, are not used for transportation. Class A
motorhomes are also different from other recreational vehicles, such as class
B van campers, which are smaller than, and do not provide all of the features
that typically are standard on, Class A motorhomes; Class C mini-low profile
and compact motorhomes, which are built on a van or small truck chassis that
is supplied with an engine and finished cab section and are differentiated by
size; and travel trailers, which are non-motorized vehicles designed to be
towed by automobiles, pick-up trucks and vans, and generally by law may not
be used as living quarters unless stationary. Travel trailers are further
classified as conventional, fifth wheel and park trailers and generally are
differentiated by the method and vehicle employed for towing, size
configuration and use. Other recreational vehicle categories include folding
camping trailers, truck campers and van conversions.
As Class A motorhomes are self-contained with kitchen, bathroom
facilities and sleeping quarters, it is eligible to be treated as a
"qualified residence" under the Internal Revenue Code of 1986, as amended.
Thus, as in the case of other recreational vehicles suitable for overnight
use, a purchaser may generally deduct interest on debt incurred to acquire a
Class A motorhome provided the purchaser designates and uses it as one of no
more than two residences and otherwise meets the requirements of the Internal
Revenue Code of 1986.
Industry Source of Information: Recreation Vehicle Industry Association in
Reston, Virginia
The following table sets forth comparisons of units and dollar sales of
all recreational vehicles and Class A motorhomes in the United States
compared with units and dollar sales of the Company during the years ended
December 31, 1998, 1999 and 2000:
% Change % Change
Unit From Prior Revenues From Prior
Sales Year (000) Year
Total Recreational Vehicles
2000 418,300 -11.7% 11,055,173 -11.2%
1999 473,800 7.4% 12,452,384 20.5%
1998 441,300 .6% 10,337,006 6.6%
Class A Motorhomes
2000 41,000 -17.0% 3,854,123 -12.3%
1999 49,400 15.2% 4,394,722 35.2%
1998 42,900 14.1% 3,249,846 23.6%
Rexhall Industries, Inc.
2000 861 -31.1% 65,175 -23.1%
1999 1,249 11.3% 84,739 17.3%
1998 1,122 3.7% 72,254 14.7%
Approximately 77 million Americans were born between the years of 1946
and 1964. Commonly known as "baby boomers", this demographic facts accounts
for what the Company believes to be a rapidly growing population of potential
Class A motorhome purchasers. Typically, Class A motorhome buyers are over
the age of 60, however, increasing disposable income in the 40 to 60 age
group is growing the potential Class A market. The Company's continued
product development combined with the unified efforts of the RV industry as a
whole to capture the attention of this buying demographic, would indicate
significant future growth potential for the Company.
The Company's Motorhomes
The Company's motorhomes are built with attention to quality. The
materials used by the Company in constructing its motorhomes are commonly
found on more expensive models and, in the opinion of management, generally
are superior to those found on motorhomes in the same price range as the
Company's motorhomes. The Company uses only steel, as opposed to wood or
aluminum, in framing its cage. The Company uses gel coated, high gloss,
one-piece fiberglass panel for the sidewalls, front cap, rear cap and roof,
giving the look of a more expensive motorhome and eliminating many of the
seams commonly found in most motorhomes. Additionally, fiberglass generally
allows easier repair of collision marks and scrapes as opposed to aluminum,
the other material commonly used in sidewall construction. For insulation,
the Company uses polyurethane foam and polystyrene.
The Company's motorhomes are also built with attention to aerodynamics.
Each motorhome has a streamlined bus-front cap that tapers to a width broader
at the junction with the sidewalls than at the leading edge of the nose.
That styling, coupled with rounded corners throughout the coach, permits a
smoother ride, particularly in high winds or when the motorhome is passed by
large trucks and trailers.
The Company currently offers six lines of Class A motorhomes. The
product lines are Aerbus, Rexair, RoseAir, Vision, Anthem and American
Clipper.
The Company's Class A line offers many models and floor plans with
multiple decors. These various models come with the following chassis and
engine types (See Item 1. Raw Materials and Chassis.):
- Ford F-53 chassis with a V-10 electronically fuel injected engine
- Workhorse chassis with the 290 H.P. Vortec engine
- Spartan Mountain Master chassis with a 300, 315 or 330 H.P.
diesel engine
- Spartan Summit chassis with a 260 H.P. diesel engine
Models range in size from an overall length of approximately 23 feet to
approximately 39 feet with wheelbase ranging from 158 inches to 252 inches.
All models have an overall maximum width of eight and one half feet (102"
widebody) with a height (with air conditioner) of just over eleven feet.
In addition to size of chassis, Rexair, Aerbus, RoseAir, Vision, Anthem
and American Clipper models are differentiated by exterior graphics, floor
plans and sleeping accommodations. Depending on the model, each motorhome is
equipped to sleep four to six adults comfortably. Standard features and
equipment on all Rexhall models include 60 or 100 gallon gas tank (depending
on chassis and model), halogen headlights, dash air conditioning, double door
flush mounted refrigerator/freezer, three burner range with automatic pilot
and optional conventional oven, radial tires, stabilizing air bags, 34,000 or
35,000 B.T.U. furnace, day/night shades and extra large batteries mounted on
a slide-out tray for easy access and service. Additional standard equipment
includes a television, television antenna, AM/FM stereo radio with cassette
player, auxiliary power generators, microwave oven, roof air conditioners,
and video cassette recorder. Optional equipment includes leak detector for
propane, back up camera, washer and dryer, hydraulic leveling jacks, electric
and heated mirrors, 50 AMP service, ice maker and power entry step for easier
entry into the motorhome. Some models may vary in standard equipment.
Suggested retail prices of Aerbus, Rexair, or RoseAir models with
standard equipment range from $75,000 to $148,000 and fully equipped with
available options from $82,000 to $175,000. Suggested retail prices for the
Vision and American Clipper models (entry level) with standard equipment
range from approximately $70,000 to $88,000 (add $3,000 with available
options). Anthem diesel models range from $99,000 to $105,000 with standard
equipment, and with available options from $110,000 to $130,000. In 2000,
the Company introduced two new entry level diesel products, the American
Clipper ES and the Vision ES diesel pushers. The initial marketing strategy
dictated an MSRP of $89,965 with no optional equipment available.
Specialty Vehicles
In addition to its line of Class A motorhomes, the Company also
manufactures and sells specialty vehicles. These vehicles are designed for
diverse purposes and varied users from the disabled to mobile command posts
for police and fire departments and even mobile classrooms. During 2000,
1999, and 1998, sales of specialty vehicles amounted to less than 1% of total
revenues. Although the Company has no intention of phasing out its specialty
vehicle business, it anticipates that such business will constitute a low
percentage of the Company's overall revenues in the future.
Production
The Company's manufacturing facility has been designed to permit
production of motorhomes on an assembly-line basis. At the beginning of the
line and in an effort to achieve uniformity, a partial steel cage is
pre-assembled by the Company on a jig. The steel cage is welded together on
the jig and then welded to a wall that is welded directly to the chassis to
form what the Company terms a "uni-body" design. Steel outriggers are welded
in place to support floor and basement storage compartments.
Seamless gel coated fiberglass is vacuum bonded to a steel frame to form
the exterior walls; additionally, the roof wall is vacuum bonded. When all
the exterior walls are in place, polyurethane foam insulation is sprayed
inside the ceiling radius to fill voids and further bond the exterior shell
to the frame. Exterior doors and interior paneling complete the basic
construction. Vehicle components, cabinet work, auxiliary power units,
appliances, plumbing fixtures, floor coverings, window treatments, hardware,
furniture and furnishings are then added. These components are generally
purchased in finished form from various suppliers, none of which are a sole
source.
The Company manufactures its own drivers door, compartment doors,
grills, bumpers, cabinet work, draperies, fiberglass parts and also makes
some of the furniture used in its motorhomes. The Company plans to continue
this practice of producing many of the components and certain of the
production equipment used in the manufacturing of its motorhomes as long as
such practice is practical and results in cost savings.
The Company operated one production shift, producing an average of 83
units per month during 2000. Total gross units produced in 2000 was 993
units. Increases in production can be achieved at a relatively low
incremental cost on the existing production shift by increasing the number of
production employees.
Raw Materials and Chassis
The principal raw materials used in the manufacturing process are steel,
fiberglass, lumber, plywood and plastic. These materials are purchased from
third parties and are generally available from numerous sources. The Company
has not experienced any significant delays or problems in acquiring raw
materials needed for production.
The principal component used in the manufacturing process is the
chassis, which includes the engine and drive train. The Company obtains
front engine chassis from Ford Motor Company (Ford) and Workhorse Custom
Chassis, LLC (formerly, part of GM Corporation). Rear engine pushers are
purchased from Spartan Motors. The Company acquires Ford products under a
converters agreement which is used by the Company to purchase the chassis
with financing provided by the supplier's affiliate. The financing provided
to obtain Ford chassis under the converters agreement bears interest at the
rate of prime plus 1% (10.5% at December 31, 2000) and is secured by the Ford
merchandise. Upon starting production of the motorhome, the Company is
required to pay to the lender the amount advanced for the purchase of the
underlying chassis plus accrued interest. The chassis' from Spartan and
Workhorse have net 30 day terms. Approximately 75% of all chassis were
purchased from Ford.
Ford Motor Company reacted to lower than anticipated chassis orders by
varying production of its chassis. This has resulted in a sporadic flow of
chassis to the Company. Anticipation of this by the Company resulted in
sufficient availability for the company's production needs. The Company
anticipates more consistent availability in 2001.
As is standard in the industry, arrangements with chassis suppliers
provide that either the Company or the chassis supplier may terminate their
relationship at any time. To date, the Company has not experienced any
substantial shortages of chassis. The recreational vehicle industry as a
whole has from time to time experienced shortages of chassis due to the
concentration or allocation of available resources by suppliers of chassis to
the manufacturers of vehicles other than recreational vehicles or for other
causes. If Ford were to discontinue the manufacturing of motorhome chassis
or substantially reduce the current chassis allocation, or if as a group all
of the Company's chassis suppliers significantly reduced the availability of
chassis to the industry, the Company could be adversely effected.
Diesel pusher production increased considerably in 2000 as a percent of
the Company's overall production. This has resulted in increased diesel
chassis orders. Production capabilities of Spartan Motors appears sufficient
to meet the anticipated demand in 2001.
Sales and Distribution
Sales are usually made to dealers on terms requiring payments within ten
days or less of the dealer's receipt of the unit.
Most dealers have floor plan financing arrangements with banks or other
financing institutions under which the lender advances all, or substantially
all, of the purchase price of the motorhome to the Company upon shipment to
the dealer. The loan is collateralized by a lien on the purchased motorhome.
As is customary in the industry, the Company has entered into repurchase
agreements with these lenders. In general, the repurchase agreements provide
that in the event of default by the dealer on its agreement to the lending
institution, the Company will repurchase the motorhome so financed. Dealers
do not have the right to return motorhomes, except by statute in some states.
The Company's contingent liability under the repurchase agreements is
limited to the total unpaid balance (including interest and other charges)
owed to the lending institution by reason of its extension of credit to
the dealer to purchase the Company's motorhomes. The contingent liability
under repurchase agreements varies significantly from time to time, depending
upon shipments and dealer sales end-users. At December 31, 2000 and December
31, 1999, the Company's contingent liability was approximately $26,700,000
and $34,200,000 respectively. The risk of loss under these agreements is
spread over numerous dealers and financing institutions and is further
reduced by the resale value of any motorhomes that may be repurchased. To
date, the Company's losses under these repurchase agreements, upon resale
of the units, have been minimal.
Advertising and Promotion
The Company advertises its motorhomes to consumers in recreational
vehicle magazines and to dealers in trade publications and also uses
point-of-purchase promotional materials. Its promotional activities
generally consist of participation at three major recreational vehicles shows
(California RV Show in Pomona, CA, Louisville Show in Kentucky and Tampa
Super Show in Florida) held during the year, as well as local recreational
vehicles shows held by its dealers. The company also advertises its product
on the World Wide Web under the following site: http://www.rexhall.com.
E-Mail responses from consumers shows great promise for this advertising
media.
Seasonality and Backlog
The recreational vehicle business generally has been seasonal with most
sales occurring in the months of February through October, with November
through January sales generally being considerably slower.
Historically, the Company does not maintain a significant inventory of
finished motorhomes. Production is based on dealer orders and shipments
which usually occur within four to eight weeks of the receipt of an order.
At December 31, 2000, 1999 and 1998, the Company's backlog of dealer orders
were $6,351,000, $9,724,000, and $15,232,000 respectively. The Company
believes that backlog is not necessarily a reliable indication of future
sales because dealer orders not only fluctuate but, by industry customs, may
be canceled without penalty and because motorhomes have a relatively short
manufacturing cycle.
Product Warranty
The Company currently provides retail purchasers of its motorhomes with
a limited warranty against defects in materials and workmanship for 12 months
or 12,000 miles and a limited structual warranty on the steel cage for five
(5) years or 50,000 miles, both are measured from date of purchase, or upon
the transfer of the vehicle by the original owner, whichever occurs first.
The Company's warranty excludes certain specified components, including
chassis, engines and power train, which are warranted separately by the
suppliers. Warranty expense was $900,000, $1,386,000, and $1,041,000, for
the years ended December 31, 2000, 1999, and 1998 respectively. The
fluctuations in warranty cost were primarily attributed to fluctuations in
sales as well as units produced at the Indiana facility which was closed in
1998. In most cases,warranty work is performed by a member of the Company's
dealer network or by the Company's own service facility in Lancaster,
California. Management believes that the Service Center allows the Company
the benefit of providing better customer service and satisfaction.
Competition and Other Business Risks
Competition in the manufacture and sale of motorhomes and other
recreational vehicles is intense. The Company has been manufacturing Class A
motorhomes for fourteen years and competes with many manufacturers (such as
Fleetwood, National RV, Damon, Thor Industries, and Coachman), several having
multiple product lines of Class A motorhomes and other recreational vehicles
and most being larger and having substantially greater financial and other
resources than the Company. The Company sells motorhomes in most of the 50
states. Additionally, the Company sells to dealers in Canada. The Company
believes that the quality, design and value offered by its motorhomes to be
appealing to the consumer market.
The Company, like others in the recreational vehicle industry, is
dependent upon the availability of chassis from both Ford, Workhorse Chassis,
LLC (formerly part of GM), and Spartan and upon terms of financing to dealers
and retail purchasers.
Substantial increases in interest rates, the tightening of credit, a
general economic downturn or other factors negatively affecting the amount of
consumer's disposable income and confidence could have a material adverse
impact on the Company's business. Shortage of gasoline, or a substantial
increase in the price, has in the past had a materially adverse effect on the
recreational vehicle industry as a whole and could have a materially adverse
effect on the Company's business in the future.
Forward-Looking Statements & Risks
Our report contains forward-looking statements, usually expressed as our
expectations or our intentions. These are based on assumptions and on facts
known to us today, and we do not intend to update statements in this report
Rexhall's business is both seasonal and cyclical. Its business is also
subject to increases in materials costs, and pricing and other pressures from
substantially larger competitors, labor disruptions, and adverse weather
conditions. The recreational vehicle industry has in the past enjoyed
favorable recreational vehicle industry sales when we have low interest
rates, low unemployment, and ready availability, and moderate prices for
motor fuel. Management intends to remain aware of these factors and react
to them, but cannot control them or predict their timing or significance.
Regulation
The Company is subject to the provisions of the National Traffic and
Motor Vehicle Safety Act and the safety standards for recreational vehicles
and components which have been promulgated thereunder by the Department of
Transportation. The regulations under that legislation permit the National
Highway Traffic Safety Administration to require a manufacturer to remedy
vehicles containing "defects related to motor vehicle safety" or vehicles
that fail to conform to all applicable Federal Motor Vehicles Safety
Standards. The National Traffic and Motor Vehicles Safety Act also provides
for the recall and repair of recreational vehicles that contain certain
hazards or defects.
The Company is subject to the provisions of Transport Canada for
vehicles exported to Canada. The regulations under that legislation are
similar in nature and design to its American counterparts.
The Company relies on certifications obtained from chassis suppliers
with respect to compliance of the Company's vehicles with applicable
emission control standards and load bearing capacity. The Company believes
that its facilities and products comply in all material respects with
applicable environmental regulations and standards.
The Company is also increasingly subject to regulations by the various
states, with respect to relations with its dealers.
The Company is a member of the RVIA (Recreational Vehicle Industry
Association). This association has promulgated stringent standards for
health and safety in connection with the manufacture of recreational
vehicles. Each of the units manufactured by the Company has a RVIA seal
placed upon it to certify that such standards have been met. The Company's
facility is periodically inspected by government agencies and the RVIA to
ensure that the Company's motorhomes comply with applicable governmental and
industry standards.
Patents and Trademarks
The Company claims "Rexhall®", "Aerbus", "Rexair®", "RoseAir",
"Vision®", "Anthem", and "American Clipper" as trademarks but believes
its business is not dependent on these names or any other marketing device.
The Company does not have any patents or licenses in the conduct of its
business.
Employees
At December 31, 2000, the Company had a total of 381 employees (380 in
California and 1 in Indiana). None of the Company's employees is represented
by a labor union. The Company considers its relations with its employees to
be good.
Item 2. Properties
In December 1995, the Company completed construction and moved into a
87,000 square foot manufacturing facility in Lancaster, California which
serves as both a manufacturing facility and the Company's Corporate
Headquarters. The facility was designed by management to insure efficiency
and to specifically position the company with the opportunity to meet
increased production demands. In September 1996, expansion construction
began at the Lancaster site. The new addition, completed in the fourth
quarter of 1997, provided an additional 19,320 square feet of production
space. The Lancaster manufacturing plant is debt free with no mortgages on
the facility.
Until December 17, 1999, the Company owned a 97,000 square foot
production facility on 12 acres in Elkhart, Indiana. The Elkhart facility
was debt free with no mortgages on the property. The production facility was
used to manufacture motorhomes until December 30, 1997 when the company
decided to cease production at the Elkhart facility. As a result of this
decision to restructure its operations, the Company recorded a charge to
operations of $1,042,000 in 1997. The company retained its wholesale
motorhome sales, warranty and service operations at the location throughout
1998. The Company sold the Indiana facility to a third party on December
17, 1999 and recorded a gain of $573,000.
In September 1995, the Company purchased a 4.5 acre site located in
Lancaster, California to serve as the Company's RV Service Center. The site
contains a 40,000 square foot facility and was purchased from the City of
Lancaster's Redevelopment Agency for $980,000. At December 31, 2000, the
Company was indebted to the City of Lancaster Redevelopment Agency for an
amount of $738,000 with interest at 5.93% per annum due through October 2015.
Since December 1997, the Company has leased a portion of the facility to a
third party, which the lessee is a major RV retail dealer.
In September 1996, the Company purchased a 4,500 square foot facility
located one mile east of Elkhart, Indiana. The facility has 1,500 sq. ft.
of office space and a 3,500 sq. ft. warehouse area. At December 31, 2000,
this property is available for sale.
Rexhall Industries, Inc. has entered into a tentative agreement with the
City of Lancaster to acquire 14 acres adjacent to its headquarters in
Lancaster, CA. The agreement will require Rexhall to provide jobs in the
Lancaster Enterprise Zone in exchange for the property and tax credits. If
Rexhall does not fulfill all covenants of the agreement by January 31, 2012,
at that time, Rexhall will be required to pay $613,453, which is less than
the present market value. The purchase agreement is expected to be finalized
in fiscal 2001 engine diesel motorhome.
In July 2000, the Company purchased approximately 4 acres in Mesa,
Arizona to serve as a site for Price I, Inc. dba, Price One RV, which is a
wholly owned subsidiary of the Company. The Company paid $809,000 for the
land and a partially constructed commercial building located on the property.
Another $410,000 was spent by the Company to ready the site for the retail
sale and service of motorhomes.
In December 2000, the Company and Mr. William J. Rex, President & CEO,
purchased 1.7 acres in Acton, CA for $401,000. The Company and Mr. Rex each
paid 50% of the purchase price and will share equally in the construction of
a building on the property. The Company plans on using its half of the land
and building as an off-site prototype shop, while Mr. Rex intends to use his
half for personal endeavors outside the Company's scope of business.
The Company believes its facilities are adequate to meet its foreseeable
needs.
Item 3. Legal Proceedings
The class action lawsuit Masterjohn et al vs. Rexhall, et al, Case No.
752188 filed in the Superior Court of Orange County, California has been
settled on October 2, 1998. Under the Settlement Agreement Rexhall paid
$825,000 in cash, and issued one coupon per vehicle owned by members of the
class for $1,250 towards the purchase of a new Rexhall vehicle or $200 toward
service, parts and labor. New vehicle coupons expired on December 31, 2000
while service, parts, and labor coupons expired on December 31, 1999.
Coupons were redeemable at Rexhall's Lancaster, California Service Center,
as well as other designated dealerships geographically dispersed. The total
number of vehicles owned by class members was estimated at approximately
5,000. During 1997 the Company recorded a charge and established a liability
of $1,590,000 related to this settlement. During the fourth quarter of 1999,
the Company released $604,000 of the settlement reserve due to less than
expected coupon redemption rates. At December 31, 2000, the Company has no
remaining liability under the settlement agreement.
Other than the above referenced cases, the Company is a defendant in
other various legal proceedings resulting from the normal course of business.
In the opinion of company management, the resolution of such matter will not
have a material effect on its financial statements or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to the vote of security holders during the
fourth quarter of 2000.
PART II
Item 5. Market for Common Equity and Related Stockholders Matters.
Market Information.
The Company's Common Stock has traded in the over-the-counter market
since June 22, 1989 and sales and other information are reported in the
NASDAQ National Market System. The Company's NASDAQ symbol is "REXL". The
following table sets forth the range of high and low closing sale prices of a
share of the Company's Common Stock in the over-the-counter market for each
quarter since the first quarter of 1998 according to NASDAQ:
2000 High Low
First Quarter $10.38 $ 7.75
Second Quarter 9.13 5.06
Third Quarter 5.44 4.28
Fourth Quarter 6.00 4.25
1999 High Low
First Quarter $ 9.17 $ 7.62
Second Quarter 12.26 7.50
Third Quarter 12.62 9.50
Fourth Quarter 11.75 8.38
1998 High Low
First Quarter $ 5.19 $ 4.53
Second Quarter 7.63 4.44
Third Quarter 9.38 5.13
Fourth Quarter 9.00 4.75
Holders
At March 29, 2001, the Company had 62 shareholders of record.
Item 6. Selected Financial Data.
The following selected financial information of the Company should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements and notes
thereto of the Company included elsewhere herein. The following table
presents selected historical financial data of the Company for each of the
five fiscal years in the period from December 31, 1996 through December 31,
2000. The financial information as of and for each of the five years in the
period ended December 31, 2000 were derived from audited financial statements
of the Company.
Statement of Operations Data:
(in thousands, except share and per-share data)
Year Ended December 31
2000 1999 1998 1997 1996
Net Revenues $65,175 $ 84,739 $ 72,254 $ 63,012 $ 64,959
Cost of Goods Sold 54,663 69,659 59,314 55,921 56,167
Gross Profit 10,512 15,080 12,940 7,091 8,792
Selling, General, and Administrative
Expenses 6,785 7,597 7,549 7,286 6,426
Restructuring Charge --- --- (282) 1,042 ---
Income (Loss)
from Operations 3,727 7,483 5,673 (1,237) 2,366
Interest Income 265 256 157 3 29
Interest Expense (521) (208) (101) (134) (171)
Legal Settlement --- 604 --- (1,590) ---
Other Income(Expense), net 186 151 135 46 (93)
Gain on Sale of Fixed Assets --- 573 --- --- ---
Income (Loss) Before
Income Taxes 3,657 8,859 5,864 (2,912) 2,131
Income Taxes Expense
(Benefit) 1,384 3,557 2,474 (1,077) 847
Net Income (Loss) $ 2,273 $ 5,302 $ 3,390 ($ 1,835) $ 1,284
Net Income (Loss)
Per Share - Basic $ .73 $ 1.68 $ 1.09 ($ .61) $ .41
Net Income (Loss)
perShare - Diluted $ .73 $ 1.68 $ 1.08 ($ .61) $ .41
Weighted Average Shares
Outstanding - Basic 3,116,000 3,161,000 3,118,000 3,032,000 3,098,000
Weighted Average
Shares Outstanding
- - Diluted 3,116,000 3,161,000 3,140,000 3,032,000 3,148,000
Balance Sheet Data:
(in thousands)
As of December 31,
2000 1999 1998 1997 1996
Working Capital $16,689 $16,289 $10,769 $ 7,320 $ 9,483
Total Assets 39,609 36,162 28,449 23,156 23,460
Long Term Debt
Less Current Portion 705 737 767 797 826
Shareholders Equity $22,362 $20,272 $14,970 $11,444 $13,545
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following table sets forth, for each of the three years indicated,
the percentage of revenues represented by certain items on the Company's
Statements of Operations:
Percentage of Net Revenues
Year Ended December 31,
2000 1999 1998
Net Revenues 100.0% 100.0% 100.0%
Costs of goods sold 83.9 82.2 82.1
Gross profit 16.1 17.8 17.9
Selling, general, and
administrative expenses 10.4 9.0 10.4
Restructuring charge --- --- (.4)
Income from operations 5.7 8.8 7.9
Legal Settlement --- .7 ---
Other Income, net .1 .2 0.2
Gain on sale of fixed assets --- .7 ---
Income before income taxes 5.6 10.4 8.1
Income tax expense 2.1 4.1 3.4
Net income 3.5% 6.3% 4.7%
Management Discussion and Analysis
Overview
The following discussion should be read in conjunction with the
financial statements and notes thereto appearing elsewhere herein. As is
generally the case in the recreational vehicle industry, various factors can
influence sales. These factors include demographics, changes in interest
rates, competition, restrictions on the availability of financing for the
purchase of recreational vehicles as well as significant changes in the
availability and price of of gasoline. The Company's business is also seasonal
in that normally the majority of sales occur in the second and third quarter.
Prior to 1998, the Company operated two manufacturing divisions,
Lancaster, California and Elkhart, Indiana. During 1997, the Company's Board
of directors adopted a formal plan of restructuring whereby the Company
implemented a plan to cease production operations at its Elkhart, Indiana
manufacturing plant and potentially sell all or part of the real estate the
facility occupied. This decision was based upon the Company's evaluation of
costs and the product quality of the recreational vehicles being produced in
Elkhart. Concurrent with this decision, the Company completed an expansion
of its Lancaster facility to accommodate the expected rise in production.
Throughout 1998 the Company retained its wholesale motorhome sales, warranty
and service operations at the Indiana production facility. In December 1999,
the Company sold the Indiana facility.
Two key transactions adversely impacted the Company's results of
operations during 1997. In addition to the aforementioned restructuring
charge for the production closure of the Elkhart facility, the Company
reached a settlement of an existing class action lawsuit against the Company.
Pursuant to the settlement, the Company was required to pay $825,000, plus
issue coupons to all members of the class for a discount of $200 on future
repairs or $1,250 towards the purchase of a new Rexhall vehicle. The Company
reported the impact from these transactions as charges in the accompanying
statement of operations aggregating $1,042,000 for the restructuring and
$1,590,000 for the lawsuit settlement during 1997. During 1998, the
Company's restructuring effort was completed and $282,000 of the
restructuring charge was reversed. In the fourth quarter of 1999, $604,000
of the legal settlement was reversed as a result of less than expected coupon
redemptions.
To counter the short-term and long-term effects of the bankruptcy of the
Company's largest dealer in 2000, the Company established it's own retail
operations in Mesa, Arizona, Price I, Inc. dba Price One RV. Under the terms
of the repurchase agreements with the bankrupt dealer's lenders, while the
Company was only obligated to repurchase $1.2 million of motorhomes, they
elected to repurchase $4.2 million in order to keep this inventory from
being dumped on the market at substantially lower prices. As of December 31,
2000, the Company had resold $2.7 million of the repurchased inventory. The
retail operations at Price One RV did not begin in earnest until October of
2000, but Management expects this to become a profitable venture
for the Company. It is not certain how long the Company will
maintain its retail operations due to ever changing market conditions and
government regulations.
Result of Operations
Comparison of the Year Ended December 31, 2000 to Year Ended December
31, 1999
Net revenues for the year ended December 31, 2000, were $65.2 million,
compared to $84.7 million for 1999, a decrease of $19.5 million or 23.0%.
The number of units shipped,net of repurchase units, in 2000 decreased 388 to
861 in 2000 from 1,249 in 1999, a decrease of 31.1%. The average net selling
price increased approximately 12% during the period due to a higher mix of
diesel units and units with double slides.
The decline in net revenues is primarily attributable to the first
down market in years for Class "A" motorhomes and the bankruptcy of the
Company's largest dealer. Management believes the driver of the overall down
turn in the market is declining consumer confidence since the stock market
started dropping in March of 2000. This triggered a domino effect that led
to a tightening of credit for retail dealers and consumers. Management
cannot determine when these conditions will improve.
Gross profit for the year ended December 31, 2000 decreased to $10.5
million from $15.1 million for 1999, a decrease of $4.6 million or 30.5%.
The gross margin for 2000 was 16.1% as compared to 17.8% for 1999. The
decrease in sales created a smaller absorption base for manufacturing
overhead, which was the primary driver behind the decrease in gross margin.
Manufacturing overhead includes costs such as depreciation, indirect labor,
shop supplies, utilities, insurance, etc. The nature of these
costs is less variable than materials and labor, so overhead absorption
suffers in periods of quickly declining base. Management believes that
prudent steps were taken to reduce these costs as market conditions
dictated, and this small decline in gross margin compares favorably to the
rest of the industry.
Selling, general and administrative expenses (SG&A) for the year ended
December 31, 2000 were $6.8 million, compared to $7.6 million for 1999, a
decrease of $0.8 million or 10.5%. This reduction was primarily attributed
to lower warranty costs and management's quick reaction to market conditions
by holding these costs down. Despite those actions, the 23% reduction in
sales caused SG&A to increase as a percent of net revenues from 9.0% in 1999
to 10.4% in 2000.
The Company's effective income tax rate was 37.8% for the year ended
December 31, 2000 as compared with 40.2% for 1999. Basic and diluted net
income per share was $.73 and $.73 respectively, for the year ended December
31, 2000, as compared to basic and diluted net income per share of $1.68 and
$1.68, respectively, in 1999. The decrease in basic and diluted net income
per share was due to decreased net revenues and the effects of the legal
settlement and gain on sale of fixed assets during 1999, which were not a
source of income in 2000.
Comparison of Year Ended December 31, 1999 to Year Ended December 31,
1998
Net revenues for the year ended December 31, 1999, were $84.7 million,
compared to $72.3 million for 1998, an increase of $12.4 million or 17.3%.
The number of units shipped in 1999 increased 127 to 1,249 in 1999 from
1,122 in 1998, an increase of 11.3%. The average net selling price increased
approximately 5% during the period. The increase in average per unit selling
price results from a 75% increase in diesel model sales over the prior year
and continued increases in double slide unit sales (50%). The increases in
these higher priced models were complimented by the strong demand for
Rexhall's lower priced Vision and American Clipper models, whose sales
increased by 30% over 1998 sales.
Gross profit for the year ended December 31, 1999 increased to $15.1
million from $12.9 million for 1998, an increase of $2.2 million or 17.1%.
The gross margin for 1999 was 17.8% as compared to 17.9% for 1998. The
increase in gross profit remained steady as the Company was able to hold most
material costs stable and pass on the few increases that were necessary.
While there was no material change in production labor cost, the introduction
of the millennium edition motorhome in late 1999 resulted in a temporary
increase in direct labor costs.
Selling, general and administrative expenses (SG&A) for the year ended
December 31, 1999 were $7.6 million, compared to $7.5 million for 1998.
Overall, SG&A expense remained relatively unchanged from the prior year.
Within this cost category several areas of cost increased in conjunction with
sales but were offset by other reductions in cost. The decrease in selling,
general and administrative expenses as a percentage of net revenues from
10.4% in 1998 to 9.0% in 1999 results from the increased sales level while
maintaining the level of administrative spending.
At December 31, 1999, the Company's most significant obligations under
the Masterjohn legal settlement had been completed. As a result of the less
than expected coupon redemptions, the Company re-evaluated the required legal
settlement reserve resulting in the reversal of $604,000. The remaining
$125,000 represents the estimated utilization of $1,250 coupons for new
motorhome purchases.
On December 17, 1999, the Company sold its Indiana manufacturing
facility. The sale resulted in a pre-tax gain of $573,000 for the year ended
December 31, 1999. The Company halted production at the 97,000 square foot
Indiana factory in 1999 as it consolidated its operations in California.
The Company's effective income tax rate was 40.2% for the year ended
December 31, 1999 as compared with 42.2% for 1998. Basic and diluted net
income per share was $1.68 and $1.68 respectively, for the year ended
December 31, 1999, as compared to basic and diluted net income per share of
$1.09 and $1.08, respectively, in 1998. The increase in basic and
diluted net income per share was due to increased sales and decreased SG&A
costs as a percentage of net revenues as well as the effects of the legal
settlement and gain on sale of fixed assets during 1999 which were not
expensed in 1998.
Liquidity and Capital Resources
The Company has relied primarily on internally generated funds, trade
credit and debt to finance its operations and expansions. As of December 31,
2000, the Company had working capital of $16,689,000, compared to $16,289,000
at December 31, 1999, a $400,000 increase in working capital. Significant
working capital increases are reflected in a $4,142,000 decrease in accounts
payable, partially offset by a $1,104,000 decrease in accounts receivable,
and a decrease of $2,903,000 in cash.
Capital expenditures during 2000 were $1,910,000. Management
anticipatesa lower level of capital expenditures in 2001. Cash flows from
financing activities consisted primarily of the repurchase and retirement of
stock on the open market of $547,000. Managment will continue to repurchase
and retire stock during 2001 providing it continues to be a good investment
of the Company's resources.
As of December 31, 2000 the Company has a $3,500,000 line of credit with
a bank which can be used for working capital purposes secured by equipment,
inventory, and receivables. The line of credit expires July 1, 2001. Under
this line of credit, $283,000 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
workmen's compensation insurance in California. At December 31, 2000, 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 at December 31, 2000.
The Company has a line of credit with a chassis vendor, Ford Motor
Credit Company ("FMCC"), with a $8,000,000 limit. Borrowings under the line
bear interest at an annual rate of prime plus 1% (10.5% at December 31,
2000). All borrowings are secured by the Ford merchandise. The outstanding
balances included in accounts payable at December 31, 2000 and 1999 were
$3,555,000 and $7,145,000 respectively.
The Company has a line of credit with a financial institution for
financing purchases of inventory for its retail operations. The line of
has a limit of $7,500,000 and borrowings under the line bear interest at an
annual rate of prime plue .5% (10% at December 31, 2000). All borrowings
are secured by inventory held by the Company's retail operations. The
balance outstanding at December 31, 2000 was $6,605,000.
The Company anticipates that it will be able to satisfy its ongoing cash
requirements through 2001, 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
On March 31, 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, Accounting for Certain Transactions involving Stock
Compensations - an interpretation of APB Opinion No. 25 (FIN44). This
Interpretation provides guidance for issues that have arisen in applying APB
Opinion No. 25, Accounting for Stock Issued to Employees. FIN 44 applies
prospectively to new awards, exchanges of awards in a business combination,
modifications to outstanding awards, and changes in grantee status that occur
on or after July 1, 2000, except for the provisions related to repricings and
the definition of an employee which apply to awards issued after December 15,
1998. The provisions related to modifications to fixed stock option awards
to add a reload feature are effective for awards modified after January 12,
2000. The new Interpretation did not have a material impact upon the
financial statements.
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 we are approaching the
period when sales have usually declined. Low interest rates, low
unemployment, and ready availability of motor fuel have in the past been
associated with favorable recreational vehicle sales as has occurred in 1998
and 1999. However, the recent interest rate and gas prices increases,
coupled with recent reports of decreased consumer confidence may reduce
future sales levels. The seriousness of a potential decline cannot be
predicted. Many of Rexhall's competitors are substantially larger, and
of its suppliers and dealer's also have greater economic power so that the
volume and prices of both supplies and sales may be adversely affected.
Management intends to remain aware of these factors and react to them, but
cannot predict their timing or significance.
Item 7A: Quantitiative and Qualitative Disclosure about Market Risk
In the ordinary course of its business the Company is exposed to certain
market risks, primarily 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 or
operations or cash flows for the next fiscal year. The Company's line of
credit permits a combination of fixed and variable rates at the Company's
option, which management believes reduces the risk of interest fluctuations.
Item 8. Financial Statements
Independent Auditor's Report
The Board of Directors
Rexhall Industries, Inc.
We have audited the accompanying consolidated balance sheets of Rexhall
Industries, Inc. and subsidiary as of December 31, 2000 and 1999, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 2000.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An
audit includes examining on a test basis evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Rexhall
Industries, Inc. and subsidiary as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2000 in conformity with accounting
principles generally accepted in the United States of America.
/s/ KPMG LLP
Los Angeles, California
March 7, 2001
REXHALL INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 2000 and 1999
ASSETS 2000 1999
CURRENT ASSETS
Cash $ 3,427,000 $ 6,330,000
Accounts receivables, less allowance
for doubtful accounts $100,000 in
2000, and $50,000 in 1999 5,832,000 6,936,000
Income Tax Receivable 281,000 ---
Inventories 22,475,000 16,504,000
Deferred income taxes (note 6) 821,000 1,133,000
Other current assets 340,000 341,000
Total Current Assets 33,176,000 31,244,000
Property and equipment at cost net of
accumulated depreciation (note 2) 6,152,000 4,753,000
Property held for sale (note 11) 127,000 131,000
Other assets 154,000 34,000
TOTAL ASSETS $ 39,609,000 $ 36,162,000
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable (note 3) $ 6,773,000 $ 10,915,000
Notes Payable and current
portion of long-term debt (note 5) 6,638,000 31,000
Warranty allowance 837,000 1,000,000
Accrued Legal (note 8) 445,000 737,000
Dealer Incentives 732,000 1,050,000
Other accrued liabilities 691,000 497,000
Accrued Compensation and Benefits 371,000 725,000
TOTAL CURRENT LIABILITIES 16,487,000 14,955,000
Deferred income taxes (note 6) 55,000 198,000
Long-Term debt, less current
portion (note 5) 705,000 737,000
TOTAL LIABILITIES 17,247,000 15,890,000
SHAREHOLDERS' EQUITY
Preferred Stock - no par value
Authorized, 1,000,000 shares;
No shares outstanding at December 31, 1999
and December 31, 2000 --- ---
Common stock-no par value,
Authorized, 10,000,000 shares,
issued and outstanding;
3,057,000 at December 31, 2000
and 3,161,000 at 1999 (Note 9) 6,241,000 6,788,000
Loan receivable from exercise
of options (Note 4) (57,000) (421,000)
Retained earnings 16,178,000 13,905,000
TOTAL SHAREHOLDERS' EQUITY 22,362,000 20,272,000
Commitments and Contingencies (Note 3 and 7)
TOTAL LIABILITIES AND SHAREHOLDER EQUITY $ 39,609,000 $ 36,162,000
See accompanying notes to financial statements
REXHALL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 and 1998
2000 1999 1998
Net Revenues (Note 10) $ 65,175,000 $ 84,739,000 $72,254,000
Cost of Sales 54,663,000 69,659,000 59,314,000
Gross Profit 10,512,000 15,080,000 12,940,000
Operating Expenses:
Selling, General and
Administrative Expenses 6,785,000 7,597,000 7,549,000
Restructuring Charge --- --- (282,000)
Income from Operations 3,727,000 7,483,000 5,673,000
Other Income, net
Interest Income 265,000 256,000 157,000
Interest Expense (521,000) (208,000) (101,000)
Legal Settlement --- 604,000 ---
Other Income (Expense),net 186,000 151,000 135,000
Gain on Sale of Fixed Assets --- 573,000 ---
Income Before Income Taxes 3,657,000 8,859,000 5,864,000
Income Tax Expense (Note 6) 1,384,000 3,557,000 2,474,000
Net Income $ 2,273,000 $ 5,302,000 $ 3,390,000
Basic Net Income Per Share $ .73 $ 1.68 $ 1.09
Diluted Net Income Per Share $ .73 $ 1.68 $ 1.08
Weighted Average Shares
Outstanding - Basic 3,116,000 3,161,000 3,118,000
Weighted Average Shares
Outstanding - Diluted 3,116,000 3,161,000 3,140,000
See accompanying notes to financial statements
REXHALL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998, 1999 and 2000
COMMON STOCK LOAN RETAINED
SHARES AMOUNT RECEIVABLE EARNINGS TOTAL
BALANCE,
December 31, 1997 2,714,000 6,267,000 (36,000) 5,213,000 11,444,000
Repurchase and
Retirement of Stock (7,000) (63,000) --- --- (63,000)
Exercise of
Stock options 161,000 584,000 --- --- 584,000
5% Stock Dividend 142,000 --- --- --- ---
Loans receivable
from exercise of
Stock options --- --- (385,000) --- (385,000)
Net Income --- --- --- 3,390,000 3,390,000
BALANCE,
December 31, 1998 3,010,000 $6,788,000 ($421,000) $ 8,603,000 $14,970,000
5% Stock Dividend 151,000 --- --- --- ---
Net Income --- --- --- 5,302,000 5,302,000
BALANCE,
December 31, 1999 3,161,000 $6,788,000 ($421,000) $13,905,000 $20,272,000
Repurchase and
Retirement of Stoc (104,000) (547,000) --- --- (547,000)
Repayment of loan
receivable related
to stock options --- --- 364,000 --- 364,000
Net Income --- --- --- 2,273,000 2,273,000
BALANCE,
December 31, 2000 3,057,000 $6,241,000 (57,000) $16,178,000 $22,362,000
See accompanying notes to financial statements
REXHALL INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
2000 1999 1998
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net Income $ 2,273,000 $ 5,302,000 $ 3,390,000
Adjustments to reconcile
net income to net cash
provided by Operating Activities:
Depreciation and amortization 364,000 368,000 344,000
Gain on sale of property, plant
and equipment --- (573,000) ---
Provision for deferred
income taxes 169,000 (85,000) 1,311,000
(Increase) decrease in:
Accounts receivable 1,104,000 (2,341,000) 747,000
Inventories 634,000 (3,730,000) (3,335,000)
Income tax receivable (281,000) --- 337,000
Increase(decrease) in:
Accounts payable (4,142,000) 2,957,000 1,846,000
Restructuring Reserve --- --- (605,000)
Warranty allowance (163,000) 34,000 29,000
Accrued legal (292,000) (857,000) 344,000
Dealer incentives (318,000) 220,000 221,000
Other assets and liabilities 348,000 (300,000) 639,000
Net cash provided by
operating activities (304,000) 995,000 4,580,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (1,759,000) (643,000) (482,000)
Proceeds from sale of
property and equipment --- 1,024,000 ---
Issuance of notes receivable (151,000) --- ---
Net cash provided by (used in)
investing activities (1,910,000) 381,000 (482,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt (30,000) (28,000) (28,000)
Repayments on short-term notes (127,000) (35,000) ---
Proceeds from exercise of
stock options 15,000 --- 199,000
Repurchase and retirement of stock (547,000) --- (63,000)
Net cash provided by
(used in)financing activities (689,000) (63,000) 108,000
NET (DECREASE) INCREASE IN CASH (2,903,000) 1,313,000 4,206,000
BEGINNING CASH BALANCE 6,330,000 5,017,000 811,000
ENDING CASH BALANCE $ 3,427,000 $ 6,330,000 $ 5,017,000
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid during
the year $ 1,370,000 $ 4,056,000 $ 1,090,000
Interest paid during the year $ 283,000 $ 183,000 $ 101,000
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES:
Loans to related parties for
stock option exercise $ --- $ --- $ 385,000
Repayment of Loan receivable through
cancellation of bonus liability $ 349,000 --- ---
Notes payable for insurance
policies $ 223,000 --- ---
Inventory puchase on vehicle
credit facility $ 6,605,000 --- ---
See accompanying notes to financial statements
REXHALL INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activities - Rexhall Industries, Inc. and subsidiary (the "Company")
is engaged in designing, manufacturing and selling Class A motorhomes. Class
A motorhomes are self-contained and self-powered recreational vehicles used
primarily in conjunction with leisure travel and outdoor activities. The
Company's wholly owned subsidiary, Price I, Inc. dba Price One RV, is a
retailer of Class A motorhomes.
Principles of Consolidation - The consolidated financial statements include
the financial statements of Rexhall Industries, Inc. and our wholly-owned
subsidiary. All significant intercompany balances and transactions have been
eliminated in consolidation.
Concentration of Credit Risk - Sales are usually made to dealers over a wide
geographic area on either a C.O.D. basis or on terms requiring payment within
ten days or less of the dealer's receipt of the unit. Most dealers have
floor plan financing arrangements with banks or other financing institutions
under which the lender advances all, or substantially all, of the purchase
price of the e motorhome. The loan is collateralized by a lien on the
purchased motorhome. As is customary in the industry, the Company has
entered into repurchase agreements with these lenders. In general, the
repurchase agreements provide that in the event of default by the dealer on
its agreement to the lending institution, the Company will repurchase the
motorhome so financed.
The Company has recorded an allowance for doubtful accounts to cover the
difference between recorded revenues and collections from customers. The
allowance for bad debts is adjusted periodically based upon the Company's
evaluation of historical collection experiences, industry trends and other
relevant factors.
Inventories - Inventories are stated at the lower of cost or market value,
determined using the first-in, first-out basis, or market. Costs include
material, labor and applicable manufacturing overhead. Inventories consist
of the following at December 31, 2000 and 1999:
2000 1999
Raw materials $ 6,561,000 $11,341,000
Work-in-Progress 1,810,000 2,485,000
Finished Goods 14,104,000 2,678,000
Total $22,475,000 $16,504,000
Depreciation and Amortization - Depreciation and amortization are computed
based on the straight-line method over the estimated useful lives of the
assets, which range from 3 to 31.5 years.
Property held for sale is stated at the lower of cost or fair value less
selling expenses realizable value and includes certain property and equipment
no longer used in the Company's operation.
Revenue Recognition - The Company derives revenue primarily from the sale of
motorhomes to dealers across the United States. Revenue is recognized when
title of the motorhome transfers to the dealer. This generally occurs upon
shipment. Revenue from the Company's retail operations are recognized when
merchandise is received by the customer. Revenues are shown net of
repurchases. Revenues are also generated from the service of motorhomes and
from shipment or installation of parts and accessories.
Warranty Reserve Policy - The Company provides retail purchasers of its
motorhomes with a limited warranty against defects in materials and
workmanship for 12 months or 12,000 miles measured from date of purchase, or
upon the transfer of the vehicle by the original owner, whichever occurs
first. The Company's warranty excludes certain specified components,
including chassis, engines and power train, and appliances, which are
warranted separately by the suppliers. The Company estimates warranty
reserves required by applying historical experience with regard to
probabilities of failure and cost to product sales covered by warranty terms.
Warranty expense was $900,000, $1,386,000 and $1,041,000 for the years ended
December 31, 2000, 1999, and 1998, respectively.
Income Taxes - Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carry forwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes
the enactment date.
Earnings per Share - Basic earnings per share represents net earning divided
by the weighted average number of common shares outstanding during the
period. Diluted earnings per share represents net earnings divided by the
weighted average number of shares outstanding, inclusive of the dilutive
impact of common stock options, provided their impact is not anti-dilutive.
See note 12.
Use of Estimates -The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions relating to the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
Segment Information - The Company's reportable business segments are
manufacturing and retail operations. Management evaluates segment
performance based primarily on revenue and net income (loss).
Accounting for Stock Options - In October, 1995, Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensations
("SFAS No. 123"), was issued. This statement encourages, but does not
require, a fair value based method of accounting for employee stock options
The Company will continue to measure compensation costs under Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees and
comply with the pro forma disclosure requirements of SFAS No. 123 in its
annual financial statements.
Fair Values of Financial Instruments - The following methods and assumptions
were used to estimate the fair value of each class of financial instruments
for which it is practicable to estimate that value:
Cash, trade and other receivables, trade accounts payable, notes payable and
accrued expenses: The carrying amounts approximate the fair values of these
instruments due to their short-term nature.
Long-Term Debt: The fair value of the Company's long-term debt is
approximates the current book value based on estimated quotations made on
long-term debt facilities with similar quality and terms.
Reclassifications - Certain reclassifications have been made to the 1999 and
1998 financial statements to conform to the 2000 presentation.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 2000 and
1999:
Useful Lives
(In years) 2000 1999
Building and Land 5,31.5 5,910,000 4,381,000
Furniture, fixtures and equipment 3-7 1,667,000 1,490,000
Autos and trucks 3-7 375,000 322,000
7,952,000 6,193,000
Less accumulated depreciation and amortization 1,800,000 1,440,000
Property and equipment, net $6,152,000 $4,753,000
3. LINES OF CREDIT
The Company has available a $3,500,000 revolving line of credit with a bank
expiring on July 1, 2001 secured by equipment, inventory, and receivable.
The reference rate is the rate of interest publicly announced from time to
time by the bank in San Francisco. At December 31, 2000, no amounts were
outstanding under this line and $283,000 of standby letters of credit have
been issued. All borrowings are collateralized by the Company's assets.
The Company has a line of credit with a chassis vendor, Ford Motor Credit
Company ("FMCC"), with a $8,000,000 limit. Borrowings under the line bear
interest at an annual rate of prime plus 1% (10.5% at December 31, 2000).
All borrowings are secured by the Ford merchandise. The outstanding balances
included in accounts payable at December 31, 2000 and 1999 were $3,555,000
and $7,145,000 respectively.
4. LOANS TO RELATED PARTIES:
From time to time the Company makes loans to certain officers and key
employees related to the exercise of stock options. During 1998, the Company
advanced $385,000 to key employees under the Company's Incentive and
Non-Statutory Stock Option Plan (The Plan) in exchange for the exercise of
123,000 options. These loans are full recourse loans and are secured by the
shares of common stock issued upon such exercise. The notes bear interest at
a rate as defined by Regulation 1.1274-4 of Internal Revenue Code of 1986,
(4.47% at December 31, 2000). Loans extended for the exercise of incentive
stock options are netted against equity. During 2000, an executive of the
company repaid a portion of the outstanding loans and related accrued
interest by foregoing the bonus liability that was due from the Company.
The maturity date of certain notes outstanding are March 20, 2003. No loans
for stock options were make to officers during 2000, and the outstanding
balance at December 31, 2000 was $57,000.
In December 2000, the Company and Mr. William J. Rex, President & CEO,
purchased a partially completed building and 1.7 acres in Acton, CA for
$401,000. The Company and Mr. Rex each contributed 50% of the purchase
price and will share equally in the final construction of the building on the
property. The Company plans on using its half of the land and building as
an off-site prototype shop, while Mr. Rex intends to use his half for
personal endeavors outside the Company's scope of business. The Company
paid $151,000 on behalf of Mr. Rex in exchange for a $151,000
note receivable. The note is secured by the excutive's interest in the
property.
5. NOTES PAYABLE AND LONG-TERM DEBT
2000 1999
Vehicle inventory credit facility;
secured by the Company's
inventory; interest rates of 10.0%
at December 31, 2000 6,605,000 ---
Promissory note payable to the City of 738,000 768,000
Lancaster Redevelopment Agency, 240 monthly
payments of $6,285 including principal
and interest at 5.93% per annum, note matures
on October 2015. The note is collateralized by
land and building with a net book value
of approximately $900,000 at December 31, 2000.
Total Notes Payable and Long-Term Debt. $7,343,000 $ 768,000
Less: Current Portion 6,638,000 31,000
Long-Term Portion $ 705,000 $ 737,000
The Company has a credit facility with a financial institution to finance the
purchase of new and used vehicle inventory. The facility provides maximum
borrowing of $7,500,000 of which $6,605,000 was outstanding at December 31,
2000. Borrowings under these facilities are secured by the Company's certain
vehicle inventory which was $7,905,000 at December 31, 2000.
Future annual minimum principal payments due on long-term debt (including
current portion) as of December 31, 2000 are as follows:
Year Ending December 31,
2001 $6,638,000
2002 35,000
2003 37,000
2004 39,000
2005 41,000
Thereafter 553,000
$7,343,000
6. INCOME TAXES
The components of income tax expense are as follows:
Years Ended December 31,
2000 1999 1998
Current:
Federal 915,000 $2,884,000 $1,018,000
State 300,000 758,000 145,000
1,215,000 3,642,000 1,163,000
Deferred:
Federal 159,000 (89,000) 950,000
State 10,000 4,000 361,000
169,000 (85,000) 1,311,000
$1,384,000 $3,557,000 $2,474,000
The components of deferred tax assets (liabilities) at December 31, 2000 and
1999 follows:
2000 1999
Current:
Allowance for bad debts 40,000 16,000
Inventory reserves and unicap 145,000 88,000
Warranty accrual 332,000 237,000
Dealer incentives --- 195,000
Reserve for self insurance 112,000 133,000
Legal reserves --- 164,000
Other accrued liabilities 97,000 32,000
State tax 95,000 268,000
$ 821,000 $1,133,000
Non Current:
Depreciation (55,000) (198,000)
Net deferred tax assets $ 766,000 $ 935,000
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate to income before income taxes
due to the following:
Years Ended
December 31,
2000 1999 1998
Income before income taxes $ 3,657,000 $ 8,859,000 $ 5,864,000
Statutory federal tax rate 34% 34% 34%
Expected tax expense 1,243,000 3,012,000 1,994,000
State taxes net of
federal effect 205,000 500,000 334,000
Permanent differences 5,000 36,000 6,000
Write off of income tax receivable --- --- 140,000
Other adjustments (69,000) 9,000 ---
Provision for income taxes $ 1,384,000 $ 3,557,000 $ 2,474,000
7. COMMITMENTS AND CONTINGENCIES
Repurchase Agreements - Motorhomes purchased under financing agreements by
dealers are subject to repurchase by the Company under the terms of financing,
at dealer cost plus unpaid interest in the event of default by the dealer.
During 2000, the Company repurchased approximately $4,190,000 as a result of
its obligations associated with the bankruptcy of its largest dealer. As of
December 31, 2000, the Company had resold $2,690,000 of the repurchased
inventory. Due to favorable negotiated repurchase prices, the effect on the
Company was nominal. Additional obligations to repurchase under the
Company's repurchase agreements amounted to approximately $150,000. At
December 31, 2000 and 1999 approximately $26,700,000 and $34,200,000,
respectively, of dealer inventory is covered by repurchase agreements.
Dealers do not have the contractual right to return motorhomes under any
Rexhall Dealer Agreement. There are also a number of state statutes
which require the repurchasing of motorhomes whenever a dealership is
terminated.
Litigation -The Company was sued by Bruce Elworthy and Anne B. Marshall
(Elworthy and Marshall) in June 1995 in the Superior Court of the County of
Los Angeles. The complaint alleged that a leveling system on a motorhome
purchased from Rexhall was defective and caused damages to Elworthy and
Marshall of $1,000,000 for medical expenses, loss of earnings, and pain and
suffering. Rexhall prevailed in its defense with zero dollars being awarded
to the Plaintiffs. The verdict is currently under appeal by the Plaintiffs.
Although the Company believes the final disposition of this matter will not
have a material adverse effect on the Company's financial position or result
of operations, if Elworthy and Marshall were to prevail on its liability
claims, a judgment on appeal in a material amount could be awarded against
the Company.
Other than the above referenced case, the Company is a defendant in
various other legal proceedings resulting from the normal course of business.
In the opinion of company management, the resolution of such matters will not
have a material effect on its financial statements or results of operations.
8. LEGAL SETTLEMENT
Legal Settlement - The class action lawsuit Masterjohn et al vs. Rexhall, et
al, Case No. 752188 filed in the Superior Court of Orange County, Californi
was settled on October 2, 1998. Under the agreement Rexhall paid
$825,000 in cash, and issued one coupon per vehicle owned by members of the
class of $1,250 towards purchase of a new Rexhall vehicle or $200 toward
service, parts and labor. New vehicle coupons expired December 31, 2000
while service, parts and labor expired December 31, 1999. Coupons were
redeemable at Rexhall's Lancaster, California Service Center, as well as
other designated dealerships geographically dispersed. The total number of
vehicles owned by class members is estimated at approximately 5,000. The
Company recorded a charge of $1,590,000 in 1997 relating to this settlement.
During the fourth quarter of 1999, the Company released $604,000 of the
settlement reserve due to less than expected coupon redemption rates. At
December 31, 2000, the Company has no remaining liability under the
settlement agreement.
9. STOCK INCENTIVE PLAN
The Company has granted stock options under its Incentive and Nonstatutory
Stock Option Plan (the "Plan"), which provides for the granting of (I)
incentive stock options to key employees, pursuant to Section 422A of the
Internal Revenue Code of 1986, and (ii) nonstatutory stock options to key
employees, directors and consultants to the Company designated by the Board
as eligible under the Plan. Under the Plan, options for up to 225,000 shares
may be granted. Options granted and outstanding under the Plan expire in
five years and become exercisable and vest in annual increments from two to
three years. The maximum term of each option may not exceed 10 years. The
following table summarizes the change in outstanding employee incentive stock
options:
Weighted
Number of Range of Options Average
Options Prices per Share Exercise Price
Outstanding options
at December 31, 1997 123,000 2.75 - 3.25 3.13
Options exercised (123,000) 2.75 - 3.25 3.13
Options canceled --- --- ---
Outstanding options at
December 31,
1998, 1999 and 2000 --- --- ---
All stock options under the Plan are granted at the fair market value of the
Company's common stock at the grant date. No options were granted to
employees during 2000 and 1999 or 1998. The Company applies Accounting
Principles Board Opinion No. 25 and related Interpretations in accounting for
the Plan. Accordingly, no compensation cost for the Plan has been recognized
in 2000, 1999 or 1998.
10. SIGNIFICANT CUSTOMERS
Sohn Corporation operates 3 Southern California locations and accounted for
13.8% of the Company's revenue in 2000. The Company had one major customer,
RV World Productions aka RV Supercenter (five (5) Arizona locations), who
accounted for 16% of the Company's net revenues during 1999. The Company
had two major customers, RV World Productions aka RV Supercenter and
Richardson's RV (five Arizona locations and three Southern California
locations, respectively), who accounted for 14% and 11% respectively of the
Company's net revenues during 1998.
11. PROPERTY HELD FOR SALE
Property held for sale consisted of 12 acres of land in Elkhart, Indiana. A
97,000 square foot building resides on the property which used to house the
Company's East Coast production facility. In fiscal 1997, the Company's
Board of Directors adopted a formal plan of restructuring whereby the Company
implemented a plan to cease production operations at this location. During
1998, the Company continued to operate a wholesale motorhome sales, warranty,
and service operations at this location. During the year-ended December 31,
1998, the Company's Board of Directors approved a plan to sell the Elkhart
property and facility in its entirety.
On December 17, 1999, the Company sold the Elkhart, Indiana manufacturing
facility land and building for total consideration of $966,000, net of
executory costs. The accompanying results of operations for the year ended
December 31, 1999 reflect the sale of such property and the resulting gain on
sale of $573,000, net of executory costs. At December 31, 2000, the
Company's customer service center in Elkhart, Indiana remained available for
sale. The facility has 1500 square feet of office space and a 3500 square
foot warehouse area with a net book value of $127,000 as of December 31,
2000.
12. INCOME PER SHARE
The following is a reconciliation of the basic and diluted income per share
computation for the year 2000, 1999 and 1998 (in thousands):
Year ended December 31
2000 1999 1998
Net income used for basic and
diluted income per share $2,273 $5,302 $3,390
Share of Common Stock and
Common Stock equivalents:
Weighted average shares used
in basic computation 3,116 3,161 3,118
Weighted average stock options --- --- 22
Shares used in diluted computation 3,116 3,161 3,140
Income per share:
Basic $ .73 $ 1.68 $ 1.09
Diluted $ .73 $ 1.68 $ 1.08
During the twelve months ended December 31, 2000, the Company repurchased
104,000 common shares on the open market at an average cost of $5.26 per
share.
13. SEGMENT INFORMATION
In accordance with the requirements of SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information," the Company's reportable
business segments and respective accounting policies, policies of the
segments are the same as those described in Note 1. Management evaluates
segment performance based primarily on revenue and net income (loss).
Segment information is summarized as follows (in thousands):
Dec. 31, 2000 Dec. 31,1999 Dec. 31, 1998
Net Revenues:
Manufacturing $ 67,307 $ 84,739 $ 72,254
Retail Operations 1,745 --- ---
Intercompany Elimination (3,877) --- ---
$ 65,175 $ 84,739 $ 72,254
Net Income (Loss):
Manufacturing $ 2,887 $ 5,302 $ 3,390
Retail Operations (139) --- ---
Intercompany Elimination (475) --- ---
$ 2,273 $ 5,302 $ 3,390
Total Assets:
Manufacturing $ 33,311 $36,162
Retail Operations 8,095 ---
Intercompany Elimination $ (1,797) $ ---
$ 39,609 $36,162
14 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The results of operations for fiscal 2000 and 1999 are as follows:
IN THOUSANDS, First Second Third Fourth
EXCEPT PER SHARE DATA Quarter Quarter Quarter Quarter
FISCAL 2000:
Net Revenues $20,664 $15,090 $12,646 $16,775
Gross Profit 3,303 2,032 2,599 2,578
Income Before
Income Taxes 1,655 655 883 464
Net Income 964 360 498 451
Basic and Diluted Net
Income Per Share (1) .31 .11 .16 .15
FISCAL 1999:
Net Revenues $22,233 $20,937 $20,590 $20,979
Gross Profit 4,139 3,666 4,016 3,259
Income Before
Income Taxes 2,095 2,094 2,060 2,610
Net Income 1,259 1,248 1,251 1,544
Basic and Diluted Net
Income Per Share (1) .40 .39 .40 .49
(1) Net income per share amounts for each quarter are required to be computed
independently and may not equal the amount computed for the total year.
Item 9. Changes in and disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Part III
Item 10. Directors and Executive Officers of the Registrant.
The executive officers and directors of the Company and their ages as of
March 31, 2001 are as follows:
Name Age Positions Held Director Term
William J. Rex (1)) 50 Chairman of the Board of 6/01/96 thru
Directors, CEO and President 5/31/01
Donald C. Hannay, Sr. 73 Vice President of 6/01/96 thru
Sales & Marketing 5/31/01
Director
Robert A Lopez (1) (2) 61 Director 6/01/96 thru
5/31/01
Frank A. Visco (1) (2) 56 Director 12/17/98 thru
5/31/01
Dr. Dennis K. Ostrom (2) 59 Director 7/12/99 thru
5/31/01
Cheryl L. Rex 48 Corporate Secretary
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Directors of the Company hold office until the next annual meeting of
shareholders and until their successors are elected and qualified, or until
their earlier resignation or removal. All officers are appointed by and
serve at the discretion of the Board of Directors. The Company has an
"executive officer" within the meaning of the rules and regulations
promulgated by the Securities and Exchange Commission. Except for William J.
and Cheryl Rex, who are husband and wife, there are no family relationships
between any directors or officers of the Company. For their services as
members of the Board of Directors, outside directors receive $500 for each
Board meeting attended.
Mr. Rex, a founder of the Company, has served as the Company's Chief
Executive Officer from its inception as a general partnership to date. Upon
commencing operations in corporate form, Mr. Rex became the Company's
President and Chairman of the Board, offices which he continues to hold.
From March 1983 until founding the Company, Mr. Rex served in various
executive capacities for Establishment Industries, Inc., a manufacturer of
Class A and Class C motorhomes which was acquired in June 1985 by Thor
Industries, Inc., a large manufacturer of recreational vehicles. His last
position with Establishment Industries, Inc. was President. From 1970 until
March 1983, Mr. Rex was employed in various production capacities by Dolphin
Trailer Company, a manufacturer of a wide range of recreational vehicles
products. At the time he left Dolphin Trailer Company (which changed its
name to National R.V., Inc. in 1985), Mr. Rex was Plant Manager in charge of
all production and research and development.
Mr. Hannay, Sr. joined the Company in December 1987 and is responsible
for product sales. He became a Director in May 1989. From April 1982 until
August 1987, he was employed by Establishment Industries, Inc. as Vice
President, Sales and Marketing, where he built Establishment's dealer network
and was responsible for dealer sales. From August 1987 until joining the
Company, he was employed as General Sales Manager by Komfort Industries of
California, Inc., a recreational vehicle manufacturer located in Riverside,
California.
Mr. Robert A. Lopez is President of Nickerson Lumber and Plywood. Mr.
Lopez started his employment with Nickerson as an outside salesman in 1969
and in 1980 he became a partner and purchased Nickerson Lumber stock. He was
elected as President of Nickerson in 1981. His background in marketing
products is primarily to residential builders, manufactured housing and
recreational vehicle assemblers. In his spare time, if any, Mr Lopez is
captain of the San Fernando Rangers, a non-profit organization working to use
horses as therapeutic conditioning for mentally and physically disabled
children.
Mr. Frank A. Visco was elected to the Board of Directors on December 17,
1998. Mr. Frank A. Visco is owner of Frank A. Visco & Associates insurance
company. Mr. Visco began his insurance career in 1970 with New York Life
Insurance Company as a Sales Manager in their Antelope Valley office. From
1975-1984 he was the co-owner of APS Co. Inc., producing aircraft parts for
the aircraft industry. In 1980, in addition to his insurance activities, he
began developing properties in Los Angeles County and Kern County.
Dr. Ostrom was elected to the Board of Directors on July 12, 1999. Dr.
Ostrom received his BS, MS and Ph.D. degrees in Engineering from the
University of California, Los Angeles. He majored in structural mechanics
and dynamics. Dr. Ostrom is a Professional Civil Engineer in the State of
California. Dr. Ostrom was employed by Southern California Edison Company
from 1970 - 1996. His position was that of a Consultant. His job was
formulating technical strategy and policy and relating the same to the
California Energy Commission, California Public Utilities Commission, Nuclear
Regulatory Commission and local regulatory agencies.
Dr. Ostrom has written several papers about risk management and how this
relates to equipment purchasing and risk mitigation strategies, including
insurance purchase decisions. While at Edison, he applied this expertise as
a private consultant (with knowledge and consent of Edison) for other
utilities and organizations, i.e., United States National Academics of
Science and Engineering; Office of Technology Assessment, Congress of the
United States; Coca Cola; Bonneville Power Authority; British Columbia Hydro;
New Zealand Centre for Advanced Engineering; East Bay Municipal Utility
District; Puget Sound and Power; Snohomish County Public Utility District;
Central United States Earthquake Consortium; Tennessee Valley Authority;
Eugene Water & Electric Board and Humbolt Bay Municipal Water District.
From 1988 to present, Dr. Ostrom has been a member of the Board of
Directors for Keysor Century, Inc., Saugus, California. Currently Dr. Ostrom
is an ongoing consultant for San Diego Gas & Electric, Pacific Gas & Electric
and Southern California Edison. In addition to his consulting work, Dr.
Ostrum is the Planning Commissioner for the City of Santa Clarita.
Mrs. Cheryl L. Rex is the Corporate Secretary and has been with Rexhall
since 1986 serving in many different capacities. Mrs. Rex served as
Administrative Operations Manager, in addition to being responsible for the
interior design and decor of the motorhomes, as well as assisting in the
production of the Company's product brochures.
Item 11. Executive Compensation.
Cash Compensation
The following table sets forth certain information as to the five
highest paid(1) of the Company's executive officers whose cash compensation
exceeded $100,000 for the year ended December 31, 2000:
SUMMARY COMPENSATION TABLE
Annual Compensation
Bonus
Name and Accrued Other Annual
Principal Position Year Salary ($) Bonus Paid Non-Paid Compensation
(2)
William J. Rex 00 250,000 See Note 3 5,000 ---
99 250,000 445,000 411,000 ---
98 250,000 295,000 310,000 ---
Donald C.
Hannay, Sr. 00 62,800 161,800 12,400 ---
V.P. of Sales
& Marketing 99 61,400 201,600 20,700 ---
98 52,000 178,000 --- ---
James C. Rex 00 52,000 54,000 --- ---
National Director
of Service and Warranty
(1) Note: Only two executive officers received cash compensation in
excess of $100,000.
(2) The unreimbursed incremental cost to the Company of providing perquisites
and other personal benefits during 2000 did not exceed, as to any named
officer, the lesser of $50,000 or 10% of the total 2000 salary and bonus paid
to such named officer and, accordingly, is omitted from the table. These
benefits included (i) reimbursement for medical expenses and (ii) amounts
allocated for personal use of a company-owned automobile provided to Mr.
Rex.
(3) For 2000, William J. Rex earned a bonus of $491,000 of which he was
paid $486,000 leaving $5,000 in the accrued bonus account. Mr. Rex used
$384,000 of accrued bonus from 1999 to repay a loan, with interest, the
Company made to him in 1998 under the Company's Stock Option Program. The
remaining $27,000 of the $411,000 accrued bonus from 1999 was paid to Mr.
Rex in 2000. All combined, Mr. Rex was paid $513, 000 in cash for 1999
and 2000 bonuses in 2000, while he used another $384,000 to repay the loan
with interest.
(4) Mr. James C. Rex is the brother of Mr. William J. Rex.
Compensation Committee Report
On August 1, 1996, the Company renewed for 5 years (expires July 31,
2001) an employment agreement with William J. Rex. The employment agreement
provides for an annual salary of $250,000 plus a bonus determined monthly
equal to 10% of income before bonus and taxes. Other executive officers are
compensated based on the following factors as determined by the Board of
Directors: (1) the financial results of the Company during the prior year or
sales commission, (2) compensation paid to executive officers in prior years,
(3) extraordinary performance during the year and (4) compensation of
executive officers employed by competitors.
Directors who are not Executive Officers are paid $500 per Board Meeting
and there are three to four Board Meetings per year.
The Company also has an incentive program under which it pays
supervisory employees involved in the sales and production a cash bonus based
on specific performance criteria. Committee members: William J. Rex, Robert
A. Lopez and Frank A. Visco.
Stock Option Plan
In May 1989, the Company adopted the 1989 Incentive and Nonstatutory
Stock Option pursuant to Section 422A of the Internal Revenue Code of 1986,
as amended, to (i) key employees, and (ii) to directors and consultants to
the Company designated by the Board as eligible under the Option Plan. Under
the Option Plan, options for up to 225,000 shares may be granted.
The Option Plan is administered by the Board of Directors or by a
committee appointed by the Board, which determines the terms of options
granted, including the exercise price, the number of shares subject to the
options, and the terms and conditions of exercise. No option granted under
the Option Plan is transferable by the optionee other than by will or the
laws of descent and distribution, and each option is exercisable during the
lifetime of the optionee only by such optionee.
The exercise price of all stock options granted under the Option Plan
must be at least equal to the fair market value of such shares on the date of
grant, and the maximum term of each option may not exceed 10 years. With
respect to any participant who owns stock possessing more than 10% of the
voting rights of the Company's outstanding capital stock, the exercise price
of any stock option must be not less than 110% of the fair market value on
the date of grant and the maximum term of such option may not exceed five
years. Stock appreciation rights are not authorized under the Option Plan.
For the years ended December 31, 2000, 1999 and 1998, there were no
options granted or canceled to key executives. At December 31, 2000 there
were no options outstanding.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information regarding the ownership of
the Company's Common Stock by (I) each person known by the Company to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock,
(ii) each of the Company's directors beneficially owning Common Stock and
(iii) all of the Company's officers and directors as a group as of March 29,
2001:
Number of
Name of Beneficial Owner Shares Percent of
Outstanding Beneficially Shares at
or Identity of Group Owned (1) March 28, 2001
William J. Rex (1)..... 1,623,000 53.1%
c/o Rexhall Industries
46147 7th Street West
Lancaster, California 93534
All Directors and
Officers as a
Group (6 persons) 1,649,000 53.9%
(1)The persons named in the table have sole voting and investment power with
respect to all shares of Common Stock Shown as Beneficially owned by him,
subject to applicable community property law.
Item 13. Certain Relationships and Related Transactions.
Robert A. Lopez, one of the Company's Directors, owns Nickerson Lumber, which
sells the Company lumber at market rates. Purchases during 2000 and 1999,
were less than $100,000 and $200,000, respectively.
PART IV
Item 14. - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8K
Financial Statements
See Item 8
Financial Statement Schedule
All applicable financial statement schedules have been omitted since
required information is not present in amount sufficient to require separate
disclosure on the balance sheet or information is included in the financial
statements.
(3.0) Articles of Incorporation and By Laws. See 1992 10KSB
(4.0) Instruments defining the rights of Holders of Common Stock. See
Page 24 of Prospectus dated 6/22/89. See 1992 10KSB.
(10.1) Revolving Credit Agreement dated May 22, 1998 between Company and
Bank of America. Refer to original agreement and subsequent
amendments.
(10.2) Employee agreement of William J. Rex
(10.3) Authorized Ford Motor Company Converter Pool Agreement effective
6/27/90. See 1992 10KSB (10.4)Incentive and Non-Statutory Stock
Option Plan.
(10.5) Material Contracts - Chevrolet Quality Approved Converter Program
dated 10/1/88. See 1992 10KSB.
(13.1) Supplemental information pursuant to Section 15D of Exchange Act
1) Proxy Statement dated 2000
2) 2000 Annual Report
(13.2) Form 10Q is attached for 1st, 2nd, and 3rd quarter labeled
(Exhibit 13)
(22.0) Published report regarding matters submitted to vote (Proxy
statement dated 1999)
(27.0) Financial Data Schedule
(28.0) Copy of State Insurance Annual Report for year ended 12/31/99
labeled (Exhibit 28).
Signatures
In accordance with Section 13 or a5(b) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, there unto
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, President, J. Michael Bourne,
CEO & Chairman Executive Vice President & COO
Date: March 31, 2001 Date: March 31, 2001
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: March 31, 2001
By /S/ Donald C. Hannay, Sr.
(Signature and Title)*
Donald C. Hannay, Sr.
Vice President of Sales & Marketing
Director
Date: March 31, 2001
By /S/ Robert A. Lopez
(Signature and Title)*
Robert A. Lopez
Director
Date: March 31, 2001
By /S/ Frank A. Visco
(Signature and Title)*
Frank A. Visco
Director
Date: March 31, 2001
By /S/ Dr. Dennis K. Ostrom
(Signature and Title)*
Dr. Dennis K. Ostrom
Director
Date: March 31, 2001