SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For Quarter End June 30, 2003 Commission file number: 0-17824
REXHALL INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
California 95-4135907
(State of Incorporation) (IRS Employer Identification No.)
46147 7th Street West, Lancaster, California 93534
(Address of principal executive offices) (Zip Code)
(661) 726-0565
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
Applicable only to Corporate Issuers
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
5,872,700 as of August 07, 2003.
REXHALL INDUSTRIES, INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE NUMBER
Item 1.
Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets at June 30, 2003
and December 31, 2002 1
Condensed Consolidated Statements of Operations for the
Three and Six months ended June 30, 2003 and June 30, 2002 2-3
Condensed Consolidated Statements of Cash Flows for the
Six months ended June 30, 2003 and June 30, 2002 4
Notes to Condensed Consolidated Financial Statements 5-6
Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations 6-12
Item 3.
Quantitative and Qualitative Disclosure about Market Risks 12
Item 4.
Controls and Procedures 12-13
PART II - OTHER INFORMATION
Legal Proceedings 13
Exhibits and Reports on Form 8-K 13
Signatures 14
Officer Certifications 15-16
PART I - FINANCIAL INFORMATION
Item 1. - Condensed Consolidated Financial Statements
REXHALL INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, 2003 December 31, 2002
ASSETS
CURRENT ASSETS
Cash $ 458,000 $ 5,757,000
Accounts Receivables, net 2,654,000 2,251,000
Income Tax Receivable 536,000 360,000
Inventories 17,599,000 15,049,000
Deferred Income Taxes 933,000 1,003,000
Other Current Assets 154,000 139,000
Current Assets of Discontinued Operations ----- 182,000
TOTAL CURRENT ASSETS $ 22,334,000 $ 24,741,000
Property and Equipment at Cost Net
of Accumulated Depreciation 5,901,000 5,021,000
Property Held for Sale ----- -----
Other Assets 152,000 152,000
Non-Current Assets of Discontinued Operations ----- 37,000
TOTAL ASSETS $ 28,387,000 $ 29,951,000
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 2,779,000 $ 1,622,000
Chassis Vendor Line of Credit 1,685,000 3,381,000
Notes Payable and Current Portion
of Long-Term Debt 62,000 36,000
Accrued Warranty 927,000 991,000
Accrued Legal 982,000 1,250,000
Accrued dealer incentives 569,000 638,000
Other Accrued Liabilities 1,435,000 1,750,000
Accrued Compensation and Benefits 490,000 472,000
Current Liabilities of Discontinued Operations ----- 20,000
TOTAL CURRENT LIABILITIES 8,929,000 10,160,000
Long-Term Debt, less Current Portion 965,000 634,000
TOTAL LIABILITIES 9,894,000 10,794,000
STOCKHOLDERS' EQUITY
Preferred Stock - no par value,
Authorized, 1,000,000 shares;
no shares outstanding at June 30, 2003
and December 31, 2002 ----- -----
Common Stock - no par value,
Authorized, 10,000,000 shares;
issued and outstanding
5,872,700 at June 30, 2003
and 6,038,000 December 31, 2002 5,580,000 5,906,000
Loan Receivable from Exercise of Options ----- -----
Retained Earnings 12,913,000 13,251,000
TOTAL STOCKHOLDERS' EQUITY 18,493,000 19,157,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 28,387,000 $ 29,951,000
See accompanying notes to condensed consolidated financial statements
REXHALL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended
June 30, 2003 June 30, 2002
Net Revenues $ 9,642,000 $18,964,000
Cost of Sales 8,383,000 16,610,000
Gross Profit $ 1,259,000 $ 2,354,000
Operating Expenses:
Selling, General, Administrative Expenses
and Other Expenses 1,725,000 1,913,000
Income/(Loss) before Income Taxes (466,000) 441,000
Income Tax (Expense)/Benefit 184,000 (177,000)
Net Income/(Loss) $ (282,000) $ 264,000
Basic and Diluted Income/(Loss)-Per Share $ (.05) $ .04
Weighted Average Shares Outstanding
Basic and Diluted 5,872,700 6,115,000
See accompanying notes to condensed consolidated financial statements
REXHALL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Six Months Ended
June 30, 2003 June 30, 2002
Net Revenues $ 22,588,000 $ 36,371,000
Cost of Sales 19,727,000 32,694,000
Gross Profit $ 2,861,000 $ 3,677,000
Operating Expenses:
Selling, General, Administrative Expenses
and Other Expenses 3,416,000 3,654,000
Income/(Loss) before Income Taxes (555,000) 23,000
Income Tax (Expense)/Benefit 217,000 (12,000)
Net Income/(Loss) $ (338,000) $ 11,000
Basic and Diluted Income/(Loss)-Per Share $ (.06) $ .00
Weighted Average Shares Outstanding
Basic and Diluted 5,872,700 6,115,000
See accompanying notes to condensed consolidated financial statements
REXHALL INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended
June 30, 2003 June 30, 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ($ 338,000) $ 11,000
Adjustments to reconcile net income
to net cash provided by (used in)
Operating Activities:
Depreciation and amortization 178,000 191,000
Gain on sale of property, plant and equipment ----- (34,000)
Provision for deferred income taxes 70,000 -----
(Increase) decrease in:
Accounts receivable (403,000) (2,064,000)
Inventories (2,551,000) (3,307,000)
Income tax receivable (176,000) 86,000
Increase (decrease) in:
Accounts payable 1,157,000 (460,000)
Warranty Allowance (64,000) 121,000
Accrued legal (268,000) (11,000)
Dealer incentives (69,000) (136,000)
Other assets and liabilities (312,000) 855,000
Net cash provided by (used in) operating activities (2,776,000) (4,748,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (1,058,000) (143,000)
Proceeds from sale of property and equipment ----- 159,000
Net cash provided by (used in) investing activities (1,058,000) 16,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on long-term debt (40,000) (17,000)
Repayments on short-term notes ----- (222,000)
Proceeds (Repayment) on chassis vendor line of credit (1,696,000) (795,000)
Proceeds from redevelopment agency 300,000 -----
Proceeds received for purchase of equipment 98,000 -----
Proceeds from loan receivable on exercise of stock options ----- 5,000
Repurchase and retirement of stock (326,000) -----
Net cash used in financing activities (1,664,000) (1,029,000)
NET CASH FLOWS FROM DISCONTINUED OPERATIONS 199,000 132,000
NET INCREASE (DECREASE) IN CASH (5,299,000) (5,629,000)
BEGINNING CASH BALANCE 5,757,000 8,662,000
ENDING CASH BALANCE $ 458,000 $ 3,033,000
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid during the period $ 74,000 $ 33,000
Supplemental Disclosure of Non-Cash Financing Activities:
Notes payable for insurance policies 475,000 -----
See accompanying notes to condensed consolidated financial statements
REXHALL INDUSTRIES, INC.
Notes to the Condensed Consolidated Financial Statements
June 30, 2003
1. Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements have
been prepared in accordance with accounting principles generally accepted in
the United States of America for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all of the
information and disclosures required by generally accepted accounting
principles for complete financial statements. However, in the opinion of
management, they include all adjustments, consisting of normal accruals,
necessary to present fairly the information set forth herein in accordance
with accounting principles generally accepted in the United States of America
for interim reporting.
For further information refer to the Financial Statements and footnotes
included in the Registrant's Annual Report on Form 10-K for the year ended
December 31, 2002.
The results of operations for any interim period are not necessarily
indicative of the results to be expected for the full year.
2. Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of 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 those estimates.
3. Income Taxes
Income tax expense is based upon the estimated effective tax rate for the
entire fiscal year. The effective tax rate is subject to on going evaluation
by management.
4. Stock Split
In July of 2002 the Company carried out a 2-for-1 stock split. All
historical share and per share data are presented on a post-split basis.
5. Earnings Per Share
Basic earnings per share represents net earnings divided by the weighted-
average number of common shares outstanding for the period. Basic and
diluted earnings per share are the same for all periods presented as the
company has no potentially dilutive securities outstanding.
6. Inventory June 30, 2003 June 30, 2002
Chassis $ 3,922,000 $ 6,165,000
Raw Materials 2,649,000 3,730,000
Work-in-Progress 2,832,000 1,752,000
Finished Goods 8,196,000 4,206,000
Total $17,599,000 $15,853,000
7. Discontinued Operations
In December 2001, the Company decided to discontinue its retail operations,
Price One RV in Mesa, Arizona. At the time of discontinuing the retail
operations, the remaining motorhome inventory was sold, at a discount, to
another dealership in Arizona. The remaining assets were absorbed into
Rexhall Industries, Inc. in 2003.
8. Property & Equipment
In January 2003, the Company completed the purchase of 12.48 acres of Land
adjacent to its headquarters in Lancaster, California. The Company paid
$564,448 in cash and issued a promissory note for $300,000, for a total of
$864,448. The agreement with the City of Lancaster will allow the promissory
note to be forgiven in total or in part based upon a formula for providing
jobs. The Company plans to build a new facility on this land so that it can
produce its own diesel chassis with a new motorhome concept to be built on
that chassis.
Item 2. - Management Discussion and Analysis of Financial Condition and
Results of Operations.
All statements in this discussion and analysis which relate to future sales,
costs, capital expenditures or earnings are "Forward-Looking Statements" and
should be read subject to the assumptions contained in the section "Forward-
Looking Statements".
Critical Accounting Policies
In the ordinary course of business, management has made a number of estimates
and assumptions relating to the reporting of results of operations and
financial condition in the preparation of its financial statements in
conformity with accounting principles generally accepted in the United States
of America. Actual results could differ significantly from those estimates
under different assumptions and conditions. Management believes that the
following discussion addresses our most critical accounting policies, which
are those that are most important to the portrayal of our financial condition
and results and require the most difficult, subjective and complex judgments,
often as a result of the need to make estimates about the effect of matters
that are inherently uncertain.
Valuation of Inventory
The Company values inventories at the lower-of-cost or market using the
first-in, first-out (FIFO) method. Adjustments to the value of inventory are
recorded based upon damage, deterioration, obsolescence and changes in market
value. In determining market value, management has considered its current
replacement cost ensuring it does not exceed net realizable value (i.e.,
estimated selling price in the ordinary course of business less estimated
costs of completion and disposal). Management has evaluated the current level
of inventories considering the order backlog and other factors in assessing
estimated selling prices and made adjustments to cost of goods sold for
estimated decrease in the net realizable value of inventory. These
adjustments are estimates, which could vary significantly, either favorably
or unfavorably, from actual results.
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. 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. 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
financed motorhome. Revenues are shown net of repurchases. The Company
specifically reserves the gross margin for known repurchase obligations
quarterly and at fiscal year end. Revenues are also generated from the
service of motorhomes and from shipment or installation of parts and
accessories.
Legal Accrual
The Company's current estimated range of liability related to some of the
pending litigation is accrued based on claims for which it is probable that a
liability has been incurred and the amount of the loss can be reasonably
estimated. Because of the uncertainties related to both the amount and range
of loss on the remaining pending litigation, management is unable to make a
reasonable estimate of the liability that could result from an unfavorable
outcome. As additional information becomes available, management will assess
the potential liability related to the pending litigation and revise the
estimates. Such revisions in the estimates of the potential liability could
materially impact the results of operation and financial position.
Results of Operations
Comparison of the three months ended June 30, 2003 to the three months ended
June 30, 2002.
Revenues - three months ended June 30, 2003 compared to the three months
ended June 30, 2002
Net revenues for the quarter ended June 30, 2003 were $9,642,000 as compared
to $18,964,000 for the same quarter in 2002. This represents a 49% decrease
from the prior year. Net units sold for the quarter ended June 30, 2003 were
112 compared to 227 for the quarter ended June 30, 2002, a 51% decrease.
Wholesale shipments of the Company's gas motorhomes were down 48%, while
diesel shipments were down 60% when compared to last year's second quarter.
Sales dropped below industry levels as a result of the failure of Rexhall's
strategy to identify the current market for recreational vehicles. In an
effort to satisfy dealers on an individual basis, Rexhall created a niche
market rather than focusing on what it now believes the vast majority of RV
customers want. Management believes that Rexhall's new product line will
appeal to the mass market, and help to bridge this gap. However, these are
forward looking statements and there can be no assurance that these
statements will reflect actual results case for the reasons discussed below
in "Forward Looking Statements."
Gross Profit - three months ended June 30, 2003 compared to the three months
ended June 30, 2002
Gross profit decreased to $1,259,000 from $2,354,000 for the same quarter in
2002, which is a decrease of $1,095,000 or 46%. Gross margin was 13.1% as
compared to 12.4% last year. The increase in gross margin was primarily
attributable to decreases in material cost for the period. Management views
this increased margin as a positive sign, but there are no assurances due to
the uncertain direction of the RV industry fundamentals and competition
within the industry.
Selling, General, Administrative and Other Expenses - three months ended June
30, 2003 compared to the three months ended June 30, 2002
Selling, General, Administrative and Other Expenses from continuing
operations decreased by approximately $188,000 from the second quarter of
2002 to the second quarter of 2003. Selling, general, administrative and
other expenses increased to 17.9% as a percentage of sales when compared to
10.1% for the quarter ended June 30, 2002. The increase is largely
attributable to the decrease in sales base coupled with increases in warranty
and legal expense.
Income Taxes - three months ended June 30, 2003 compared to the three months
ended June 30, 2002
Income tax benefit was $184,000 for the quarter ended June 30, 2003 as
compared to an expense of $177,000 in the same quarter of 2002. Income taxes
are provided based upon the estimated effective tax rate for the entire
fiscal year applied to the pre-tax income for the period. The effective tax
rate is subject to ongoing evaluation by management.
Comparison of the six months ended June 30, 2003 to the six months ended June
30, 2002.
Revenues - six months ended June 30, 2003 compared to the six months ended
June 30, 2002
Net revenues for the first six months ended June 30, 2003 were $22,588,000 as
compared to $36,371,000 for the first half of 2002. This represents a 38%
decrease from the prior year. Net units sold for the six months ended June
30, 2003 were 260 compared to 443 for the six months ended June 30, 2002, a
41% decrease. Wholesale shipments of the Company's gas motorhomes were down
37%, while diesel shipments were down 54%. Sales dropped below industry
levels as a result of the failure of Rexhall's strategy to identify the
current market for recreational vehicles. In an effort to satisfy dealers on
an individual basis, Rexhall created a niche market rather than focusing on
what it now believes the vast majority of RV customers want. Management
believes that Rexhall's new product line will appeal to the mass market, and
help to bridge this gap. However, these are forward looking statements and
there can be no assurance that these statements will reflect actual results
case for the reasons discussed below in "Forward Looking Statements."
Gross Profit - six months ended June 30, 2003 compared to the six months
ended June 30, 2002
Gross profit decreased to $2,861,000 from $3,677,000 for the same six months
in 2002, which is a decrease of $816,000 or 22%. Gross margin was 12.7% as
compared to 10.1% last year. The increase in gross margin was primarily
attributable to decreases in material cost for the period. Management views
this increased margin as a positive sign, but there are no assurances due to
the uncertain direction of the RV industry fundamentals and competition
within the industry.
Selling, General, Administrative and Other Expenses - six months ended June
30, 2003 compared to the six months ended June 30, 2002
Selling, General, Administrative and Other Expenses decreased by
approximately $239,000 from the first half of 2002 to the first half of 2003.
Selling, general, administrative and other expenses increased to 15.1% as a
percentage of sales when compared to 10.0% for the six months ended June 30,
2002. The increase is largely attributable to the decrease in sales base
coupled with increases in warranty and legal expense.
Income Taxes - six months ended June 30, 2003 compared to the six months
ended June 30, 2002
Income tax benefit was $217,000 for the six months ended June 30, 2003 as
compared to an expense $12,000 in the first half of 2002. Income taxes are
provided based upon the estimated effective tax rate for the entire fiscal
year applied to the pre-tax income for the period. The effective tax rate is
subject to ongoing evaluation by management.
Financial Condition, Capital Resources and Liquidity
The Company has relied primarily on internally generated funds, trade credit
and debt to finance its operations and expansions. As of June 30, 2003, the
Company had working capital of $13,405,000, compared to $14,581,000 at
December 31, 2002. The $1,176,000 decrease in working capital is primarily
due to a $5,299,000 decrease in cash, a $182,000 decrease in current assets
of discontinued operations, and a $1,157,000 increase in accounts payable,
partially offset by a $403,000 increase in accounts receivable, a $2,551,000
increase in inventory, a $1,696,000 decrease in the chassis vendor line of
credit, a $268,000 decrease in accrued legal, and a $315,000 decrease in
other liabilities.
Capital expenditures during the first six months of 2003 were $1,058,000.
Management does not anticipate additional capital expenditures during the
remaining half of 2003.
As of June 30, 2003, the Company had a $437,320 Reserve Line of Credit with a
bank, which has been set aside as an Irrevocable Standby Letter of Credit for
the Company to meet the requirements for Self-Insurance established by the
Department of Industrial Relations which regulates Worker's Compensation
Insurance in California. Because Rexhall has never drawn from the previous
line of credit, and due to the costs associated with maintaining a higher
line of revolving credit, Rexhall reduced its line from $2,500,000 to
$437,320 during the second quarter. The interest rate is the prime rate plus
1% (5.00% at June 30, 2003). The Line expires on September 27, 2003.
The Company has a line of credit with a chassis vendor, Ford Motor Credit
Company ("FMCC"), with a $3,500,000 limit. Borrowings under the line bear
interest at an annual rate of prime plus 1% (5.00% at June 30, 2003). All
borrowings are secured by the Ford merchandise. The outstanding balance at
June 30, 2003 was $1,685,000.
The Company anticipates that it will be able to satisfy its ongoing cash
requirements through 2003, including payments related to the expansion plans
at the California facility, primarily with cash flows from operations.
Repurchase Agreements - Motorhomes purchased by dealers, under financing
agreements with third party lenders are subject to repurchase by the Company
under the terms of the financing, at dealer cost and might include unpaid
interest and other costs in the event of default by the dealer. During the
six months ended June 30, 2003 and 2002, the Company repurchased
approximately $1,412,000 and $1,585,000 respectively, (wholesale value) of
motorhomes under these agreements. At June 30, 2003 and 2002, approximately
$23,500,000 and $28,900,000, respectively, of dealer inventory was covered by
repurchase agreements. Dealers do not have the contractual right to return
motorhomes under any Rexhall Dealer Agreement. The repurchase agreements
require the dealers to default or file for bankruptcy. There are also a
number of state statutes that require the repurchasing of motorhomes whenever
a dealership is terminated.
New Accounting Pronouncements
In April 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 145 (SFAS No. 145),
Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB No. 13 and
Technical Corrections. The Statement rescinds SFAS No. 4, Reporting Gains
and Losses from Extinguishment of Debt, which required all gains and losses
from extinguishment of debt to be aggregated and classified as an
extraordinary item (net of related income tax effect), if material. The
criteria in APB Opinion No. 30 will now be used to classify those gains and
losses. Also SFAS No. 64 amended SFAS No. 4 and is no longer necessary
because of this rescission.
In July 2002, the FASB issued Statement No. 146, Accounting for Exit or
Disposal Activities. The Statement was the second and final phase of the
project to replace SFAS No. 121 and focuses on the accounting for costs
associated with a disposal activity. The first phase was completed in August
2001 with SFAS No. 144, Accounting for the Impairment or Disposal of Long-
Lived Assets. The Statement will be effective for disposal activities
initiated after December 31, 2002, with early application encouraged.
In October 2002, the FASB issued Statement No. 147, Acquisitions of Certain
Financial Institution. The Statement applies to all acquisitions except
those between mutual enterprises (which will be a separate project). The
guidance related to (1) the application of the purchase method of accounting,
is effective for acquisitions for which the date of acquisition is on or
after October 1, 2002 and (2) accounting for the impairment or disposal of
certain long-term customer-relationship intangible assets is effective on
October 1, 2002.
In November 2002, the FASB issued Interpretation No. 45 (FIN 45), Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. FIN 45 clarifies the requirements of
SFAS No. 5, Accounting for Contingencies, relating to a guarantor's
accounting for, and disclosure of, the issuance of certain types of
guarantees. For certain guarantees issued after December 31, 2002, FIN 45
requires a guarantor to recognize, upon issuance of a guarantee, a liability
for the fair value of the obligations it assumes under the guarantee.
Guarantees issued prior to January 1, 2003, are not subject to liability
recognition, but are subject to expanded disclosure requirements. The
disclosure requirements of FIN 45 are effective immediately and are included
in Note 7. The initial recognition and measurement provisions are applicable
on a prospective basis to guarantees issued or modified after December 31,
2002. The Company has not yet determined what effect, if any, the new
recognition and measurement provisions will have on the Company's future
financial results.
In December 2002, the FASB issued Statement of Financial Accounting Standards
No. 148 (SFAS No. 148), amending FASB Statement No. 123, Accounting for
Stock-Based Compensation, to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, this Statement amends the disclosure
requirements of Statement 123 to require prominent disclosures in both annual
and interim financial statements about the method of accounting for stock-
based employee compensation and the effect of the method used on reported
results.
The Company is required to adopt SFAS No. 143 and 146 on January 1, 2003.
However, the new pronouncements are not expected to have an effect on the
Company's financial position or operating performance.
In April 2003, the FASB issued Statement of Financial Accounting Standards
No. 149 (SFAS No. 149), an amendment of FASB Statement No. 133, Derivative
Instruments and Hedging Activities, which clarifies financial accounting and
reporting for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. This statement is effective for
contracts and hedging relationships entered into or modified after June 30,
2003. The Company has not yet determined what effect, if any, the new
recognition and measurement provisions will have on the Company's future
financial results.
In May 2003, the FASB issued Statement of Financial Accounting Standards No.
150 (SFAS No. 150), Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. This Statement establishes
standards for how an issuer classifies and measures certain financial
instruments with characteristics of both liabilities and equity. It requires
that an issuer classify a financial instrument that is within its scope as a
liability (or an asset in some circumstances). Many of those instruments were
previously classified as equity. This statement is effective for financial
instruments entered into or modified after May 31, 2003 and is to be
implemented by reporting the cumulative effect of a change in an accounting
principle for financial instruments created before the issuance date of the
Statement and still existing at the beginning of the interim period of
adoption. The Company has not yet determined what effect, if any, the new
recognition and measurement provisions will have on the Company's future
financial results.
Forward-Looking Statements
Our statements of our intentions or expectations are "forward-looking
statements" based on assumptions and on facts known to us today. For
example, our expectations regarding our new product line and the introduction
and sales of our new T-Rex Double & Wide motorhomes are forward-looking
statements. There can be no guarantee that a market will exist for these
motor homes or that our new coaches will adequately respond to market trends
or appeal to the mass market. If a market does not develop for our new
motorhomes or if we fail to receive sufficient orders for them, our sales may
decline and our business and operating results could be seriously harmed.
Even if the market for these motorhomes does develop, it may not grow at an
adequate pace. Moreover, we may not be able to predict precisely the time and
expense required to overcome unexpected production problems and to ensure
production within the time limits we expect, or the reliability and high
quality of the coach at an acceptable cost. Increased costs and other
difficulties associated with manufacturing these motorhomes such as our
inability to obtain critical parts and components from suppliers timely or at
all could have a negative impact on our sales during particular periods and
on our future gross margins. Rexhall's business is seasonal and cyclical.
Most of Rexhall's competitors are substantially larger, and many of its
suppliers and dealers have greater economic power, so that the volume and
prices of both supplies and sales may be adversely affected by competitive
action.
Item 3. - Quantitative and Qualitative Disclosure About Market Risk
In the ordinary course of its business, the Company is exposed to certain
market risks, including changes in interest rates. After an assessment of
these risks to the Company's operations, the Company believes that its
primary market risk exposures relating to interest rates (within the meaning
of Regulation S-K Item 305) are not material and are not expected to have any
material adverse effect on the Company's financial condition, results of
operations or cash flows for the next fiscal year.
Item 4. - Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report on Form 10-Q, we carried
out an evaluation, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of our disclosure controls and procedures (as defined in
Rule 13a-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act"))
pursuant to Rule 13a-15 of the Exchange Act. Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that as of the
end of the period covered by the report on Form 10-Q, our Company's disclosure
controls and procedures are effective in timely alerting them to material
information relating to the Company (including its consolidated subsidiaries)
required to be included in the Company's Exchange Act filings.
Changes in Internal Controls
There have been no changes in our internal control over financial reporting
identified in connection with the evaluation required by paragraph (d) of
Rule 13a-15 or 15d-15 under the Exchange Act that occurred during the last
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings -The Company is a defendant in various legal
proceedings from the normal course of business. In the opinion of Company
management, the resolution of such matters should not have a material effect
on its financial statements or results of operations.
The Company has learned that the staff of the Securities and Exchange
Commission is conducting an investigation relating to the Company. The
Company believes that the investigation primarily relates to the facts and
events surrounding the Company's restatement of its results of operations for
the first quarter ended March 31, 2002. The Company is cooperating with the
staff in connection with the investigation.
Item 2. Exhibits and Reports On Form 8-K
(a) Exhibits
31.1 Certification of the Chief Executive Officer and Interim Chief
Financial Officer required by Rule 13a-14(a) of the Exchange Act.
32.1 Certification pursuant to Rule 13a-14(b) and 18 U.S.C. Section
1350.
(b) Reports on Form 8-K
Three reports on Form 8-K were filed during the period covered by this
Report.
* An 8-K dated April 21, 2003 was filed on April 21, 2003 reporting
matters under Item 12.
* An 8-K dated May 6, 2003 was filed on May 6, 2003 reporting
matters under Item 5.
* An 8-K dated May 20, 2003 was filed on May 20, 2003 reporting
matters under Item 12.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Rexhall Industries, Incorporated
(Registrant)
By /S/ William J. Rex
(Signature and Title)*
William J. Rex,
President and CEO
Chairman of the Board and Interim Chief Financial Officer
Date: August 14, 2003
Exhibit 31.1
Certification of the Chief Executive Officer and Interim Chief Financial
Officer required by Rule 13a-14(a) of the Exchange Act.
I, William J. Rex, certify that:
1. I have reviewed this Quarterly report on Form 10-Q of Rexhall
Industries, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. I am responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's most
recent fiscal quarter (the registrant's fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting; and
5. I the registrant's certifying officer have disclosed, based on my
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.
Date: August 14, 2003 /S/ William J. Rex
William J. Rex
President, Chief Executive Officer
and Interim Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT TO
RULE 13A-14(B) AND 18 U.S.C. SECTION 1350
In connection with the Quarterly Report of Rexhall Industries, Inc. (the
"Company") on Form 10-Q for the quarter ended June 30, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned, in the capacities and on the dates indicated below, hereby
certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
REXHALL INDUSTRIES, INC.
By: /S/ William J. Rex
August 14, 2003
William J. Rex
President and Chief Executive Officer
and Interim Chief Financial Officer
Rexhall Industries, Inc.
- - 16 -
2nd Quarter 2003, 10-Q August 13, 2003
FFMS-TT-0003-0