SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
--- Act of 1934
For the quarterly period ended June 30, 2001 or
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--- Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act nof 1934
For the transition period from to
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Commission file number 1-5654
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EXX INC
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(Exact Name of Registrant as Specified in Its Charter)
Nevada 88-0325271
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(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
1350 East Flamingo Road, Suite 689, Las Vegas, Nevada 89119-5263
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(Address or Principal Executive Offices) (Zip Code)
(702) 598-3223
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(Registrant's Telephone Number, Including Area Code)
NONE
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(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X NO
---- ----
Number of shares of common stock outstanding as of June 30, 2001:
11,290,807 Class A Shares and 617,853 Class B Shares.
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PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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A. Balance Sheets
ASSETS June 30, 2001 December 31, 2000
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(unaudited) (audited)
CURRENT ASSETS:
Cash and cash equivalents $ 9,305,000 $ 7,772,000
Short-term investments 301,000 599,000
Accounts receivable, less
allowances of $88,000
and $84,000 2,751,000 2,863,000
Inventories, at lower of cost or
market:
Raw materials 550,000 979,000
Work in process 221,000 214,000
Finished goods 2,098,000 1,802,000
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2,869,000 2,995,000
Other current assets 259,000 356,000
Refundable income taxes -- 152,000
Deferred income taxes 560,000 594,000
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TOTAL CURRENT ASSETS 16,045,000 15,331,000
Property, plant and equipment,
at cost:
Land 41,000 41,000
Buildings and improvements 2,987,000 2,987,000
Machinery and equipment 6,448,000 6,444,000
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9,476,000 9,472,000
Less accumulated depreciation
and amortization 7,568,000 7,447,000
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1,908,000 2,025,000
Long Term Investments 1,094,000 526,000
Other assets 414,000 394,000
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TOTALS $19,461,000 $18,276,000
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2
A. Balance Sheets (continued)
LIABILITIES June 30, 2001 December 31, 2000
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(unaudited) (audited)
CURRENT LIABILITIES:
Long-term debt, current portion $ 68,000 $ 63,000
Accounts payable and other
current liabilities 3,504,000 3,657,000
Income taxes payable 197,000 -
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TOTAL CURRENT LIABILITIES 3,769,000 3,720,000
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LONG-TERM DEBT:
Notes payable, less current portion 1,586,000 1,627,000
Pension Liability 473,000 473,000
Deferred tax liability 380,000 185,000
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2,439,000 2,285,000
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STOCKHOLDERS' EQUITY
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Preferred stock, $.01 par value;
Authorized 5,000,000 shares;
Common stock, Class A $.01 par value,
authorized 25,000,000 shares;
12,061,607 shares issued 121,000 121,000
Common stock, Class B $.01 par value,
Authorized 1,000,000 shares;
624,953 shares issued 6,000 6,000
Capital in excess of par value 2,670,000 2,670,000
Accumulated other comprehensive loss (588,000) (929,000)
Retained earnings 11,567,000 10,691,000
Less Treasury Stock 770,800 and 403,800
shares of Class A Common Stock and 7,100
and 6,300 shares of Class B Common Stock,
at cost, respectively (523,000) (288,000)
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TOTAL STOCKHOLDERS' EQUITY 13,253,000 12,271,000
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TOTALS $19,461,000 $18,276,000
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3
B. Statements of Income (Unaudited)
For the Three-Month For the Six-Month
Period Ended Period Ended
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June 30, 2001 June 30, 2000 June 30, 2001 June 30, 2000
------------ ------------- ------------- -------------
Net sales $ 4,927,000 $ 4,098,000 $ 9,905,000 $ 9,518,000
Cost of sales 3,071,000 2,832,000 6,535,000 6,090,000
----------- ----------- ----------- -----------
Gross profit 1,856,000 1,266,000 3,370,000 3,428,000
Selling, general and
administrative expenses 1,220,000 1,054,000 2,209,000 2,116,000
----------- ----------- ----------- -----------
Operating income 636,000 212,000 1,161,000 1,312,000
Interest expense 23,000 23,000 71,000 48,000
Other income 122,000 192,000 237,000 287,000
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Income before provision
for income taxes 735,000 381,000 1,327,000 1,551,000
Provision for income taxes 250,000 130,000 451 ,000 528,000
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Net income $ 485,000 $ 251,000 $ 876,000 $ 1,023,000
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Net income per common share
Basic $ .04 $ .02 $ .07 $ .08
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Diluted $ .04 $ .02 $ .07 $ .08
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Weighted average shares
outstanding Basic 12,114,874 12,686,560 12,184,391 12,686,560
=========== =========== =========== ===========
Diluted 12,173,993 13,078,920 12,241,907 13,078,920
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4
C. Statements of Cash Flow (Unaudited)
For the Six-Month Period Ended
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June 30, 2001 June 30, 2000
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Operating activities:
Net income $ 876,000 $ 1,023,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and Amortization 121,000 120,000
Provision for bad debts 2,000 2,000
Deferred tax liability (32,000) (80,000)
Increase (decrease) in cash attributable to changes
in operating assets and liabilities:
Accounts receivable 110,000 952,000
Inventories 126,000 (453,000)
Other current assets 97,000 (230,000)
Other assets (20,000) 219,000
Refundable Income Taxes 152,000 111,000
Deferred Income Taxes 34,000 --
Accounts payable and other
current liabilities (153,000) (707,000)
Income Taxes Payable 197,000 --
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Net cash provided by operating activities 1,510,000 957,000
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Cash flows from investing activities
Purchase of property and equipment (4,000) (108,000)
Proceeds from sale of Short Term Investments 298,000 4,029,000
Purchase of Long Term Investments -- (114,000)
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Net cash provided by investing activities 294,000 3,807,000
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Cash flows from financing activities
Payments on notes payable (36,000) (24,000)
Purchases of Treasury Stock (235,000) --
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Net cash used in financing activities (271,000) (24,000)
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Net increase in cash and cash equivalents 1,533,000 4,740,000
Cash and cash equivalents,
beginning of period 7,772,000 2,315,000
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Cash and cash equivalents,
end of period $ 9,305,000 $ 7,055,000
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C. Statements of Cash Flow (unaudited) (continued)
For the Six-Month Period Ended
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June 30, 2001 June 30, 2000
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Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 71,000 $ 48,000
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Income taxes $ 104,000 $ 536,000
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Supplemental schedule of non-cash investing and financing activities
NONE
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D. Notes to Financial Statements
Note 1: The unaudited financial statements as of June 30, 2001 and 2000
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reflect all adjustments which are necessary in the opinion of management for a
fair presentation of the results for the periods stated. All adjustments so
made are of a normal recurring nature. Certain financial information and
footnote disclosures normally included in financial statements in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted. The reader is referred to the audited
consolidated financial statements and notes thereto included in the Registrant's
Annual Report on Form 10-K for the year ended December 31, 2000.
Note 2: Long -Term Debt
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Long-Term debt represents obligations of the Handi-Pac subsidiary as
follows:
June 30, 2001
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Notes payable - SBA Loans $ 836,000
Capital lease payable 818,000
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1,654,000
Current Portion of Long-Term debt 68,000
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$1,586,000
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During the first quarter 1998, the Company opened a limited credit facility
with a bank for two subsidiaries which includes a $300,000 sub-limit for direct
borrowings and a $100,000 sub-limit for documentary letters of credit all
secured by certain of the Company's money market funds.
As of June 30, 2001, there was no other bank debt for the other
subsidiaries except as noted above.
Note 3: Stock Dividend
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Effective March 8, 2000, the Company paid a 400% stock dividend to all
shareholders of the Company's Class A and B common stock of record as of
December 16, 1999. The dividend was four shares of the Company's Class A common
stock for each share of Class A and/or Class B common stock owned by a
shareholder. All transactions and disclosures in the consolidated financial
statements, related to the Company's Class A and Class B common stock have been
restated to reflect the effects of the stock dividend. In addition, at the time
of this transaction, the Company retired the Treasury Stock in its possession,
namely 5,591,407 Class A shares and 304,153 Class B shares.
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Note 4: Comprehensive Income
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Comprehensive Income is as follows:
For the Three-Month Period Ended For the Six-Month Period Ended
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June 30, 2001 June 30, 2000 June 30, 2001 June 30, 2000
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Net income $485,000 $251,000 $ 876,000 $1,023,000
Unrealized gains on debt
and equity securities
net of taxes: 50,000 498,000 341,000 656,000
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Comprehensive Income $535,000 $749,000 $1,217,000 $1,679,000
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Note 5: The following information is reported as required for industry
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segment disclosure.
Three Months Ended June 30, 2001
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Mechanical
Equipment Toy Corporate Consolidated
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Sales $3,239,000 $1,688,000 $ - $4,927,000
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Operating income (loss) $ 642,000 $ 130,000 $(136,000) $ 636,000
Interest expense - (23,000) - (23,000)
Interest income 5,000 - 80,000 85,000
Other income 21,000 16,000 - 37,000
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Income (loss) before
Income taxes (benefit) $ 668,000 $ 123,000 $ (56,000) $ 735,000
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Six Months Ended June 30, 2001
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Mechanical
Equipment Toy Corporate Consolidated
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Sales $6,079,000 $3,826,000 $ - $9,905,000
========== ========== ========= ============
Operating income (loss) $ 988,000 $ 450,000 $(277,000) $1,161,000
Interest expense - (46,000) (25,000) (71,000)
Interest income 11,000 - 173,000 184,000
Other income 32,000 21,000 - 53,000
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Income (loss) before
Income taxes (benefit) $1,031,000 $ 425,000 $(129,000) $1,327,000
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Note 5 - cont'd
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Three Months Ended June 30, 2000
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Mechanical
Equipment Toy Corporate Consolidated
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Sales $2,611,000 $1,487,000 $ - $4,098,000
========== =============== ========= ============
Operating income (loss) $ 273,000 $ 96,000 $(157,000) $ 212,000
Interest expense - (23,000) - (23,000)
Interest income 20,000 - 114,000 134,000
Other income 54,000 4,000 - 58,000
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Income (loss) before
Income taxes (benefit) $ 347,000 $ 77,000 $ (43,000) $ 381,000
========== =============== ========= ============
Six Months Ended June 30, 2000
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Mechanical
Equipment Toy Corporate Consolidated
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Sales $6,203,000 $3,315,000 $ - $9,518,000
========== =============== ========= ============
Operating income (loss) $1,268,000 $ 335,000 $(291,000) $1,312,000
Interest expense - (48,000) - (48,000)
Interest income 31,000 - 190,000 221,000
Other income 60,000 6,000 - 66,000
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Income (loss) before
income taxes (benefit) $1,359,000 $ 293,000 $(101,000) $1,551,000
========== =============== ========= ============
Note 6: Subsequent Events
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On July 23, 2001, Newcor Inc. amended its Rights Agreement and Newcor, EXX
INC and David A. Segal amended their existing Agreement to permit EXX to
increase its ownership to 34.9% of Newcor's outstanding shares. On the same
date, six of Newcor's directors resigned and three new directors were appointed
to the Newcor Board of Directors. The three new directors are also directors of
EXX. Simultaneously, the number of directors constituting the board of directors
of Newcor was reduced to six directors. Further, on the same date, EXX purchased
679,994 shares of Newcor common stock and $500,000 principal amount of Newcor's
9.875% Senior Subordinated Notes Due 2008 from five of the resigning directors
and 24,000 shares from David A. Segal, bringing EXX's ownership to approximately
31% of Newcor's outstanding shares. In connection with such purchases, EXX paid
an aggregate of $1,679,238 in cash. For additional information about the
transactions, see Newcor's current report on Form 8-K filed July 31, 2001.
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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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The following management's discussion and analysis of results of operations
and financial condition contains certain forward-looking statements which are
covered under the safe harbor provisions of the Private Securities Legislation
Reform Act of 1995 with respect to the Company's future financial performance.
Although EXX INC believes the expectations reflected in such forward-looking
statements are based on reasonable assumptions, it can give no assurance that
its expectations will be realized. Forward-looking statements involve known and
unknown risks which may cause EXX INC's actual results and corporate
developments to differ materially from those expected. Factors that could cause
results and developments to differ materially from EXX INC's expectations
include, without limitation, changes in manufacturing and shipment schedules,
delays in completing plant construction and acquisitions, new product and
technology developments, competition within each business segment, cyclicality
of the markets for the products of a major segment, litigation, significant cost
variances, the effects of acquisitions and divestitures, and other risks.
A. Results of Operations
---------------------
Sales for the second quarter of 2001 were $4,927,000 compared to
$4,098,000 in 2000. For the six month period, 2001 sales were $9,905,000
compared to $9,518,000 in 2000, a 4% increase. The Mechanical equipment group's
second quarter sales totaled $3,239,000 compared to $2,611,000 in 2000, while
the six month sales totaled $6,079,000 compared to $6,203,000 in 2000, a 2%
decrease. The Toy segment's second quarter sales totaled $1,688,000 compared to
$1,487,000 in 2000, while the six month 2001 sales totaled $3,826,000 compared
to $3,315,000 in 2000.
Gross profit for the second quarter 2001 totaled $1,856,000 compared
to $1,266,000 in 2000. For the six month period, 2001 gross profit was
$3,370,000 compared to $3,428,000 in 2000. The Mechanical Equipment Group
produced increased gross profits for the comparable three month periods, but
showed decreased gross profits for the comparable six month periods. The Toy
Division produced increased gross profits for both the three and six month
comparable periods.
Second quarter Mechanical Equipment Group sales reflect some
improvement in the Telecommunications area. The Motor segment continues to
present the greater challenge due to the current economic conditions and our
continuing need to maintain and increase our market penetration in a very
competitive market environment.
While second quarter Toy sales have increased from the prior year and
the six months sales also reflect an increase from the prior year, management
still believes the increase represents a build-up in customers inventories and
not any indication of any industry upturn. As stated in the prior quarter,
there have been no changes in the Toy industry to indicate anything to the
contrary.
Operating income was $636,000 for the second quarter 2001 compared to
operating income of $212,000 in 2000. For the six months, operating income was
$1,161,000 compared to operating income of $1,312,000 in 2000.
Interest expense was $23,000 for the second quarter 2001 compared to
$23,000 in the same period last year. For the six months, interest expense was
$71,000 compared to $48,000 for 2000.
The net income for the second quarter of 2001 was $485,000 or 4 cents
per share (basic and diluted) compared to net income of $251,000 or 2 cents per
share (basic and diluted) in the comparable period of 2000. On a six months
basis, the net income was $876,000 or 7 cents per share (basic and diluted)
compared to net income of $1,023,000 or 8 cents per share (basic and diluted)
for the 2000 period.
10
B. Liquidity and Capital Resources
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For the six months ended June 30, 2001, the Company was provided with
$1,510,000 from operating activities as compared to $957,000 in the
corresponding period of the preceding year. For the six months ended June 30,
2001, the Company was provided with $294,000 from investing activities,
principally from the sale of Short Term investments. In the corresponding
period of the preceding year, the Company was provided with $3,807,000 for
investing activities, principally from the sale of short tem investments. Cash
used in financing activities during the six months ended June 30, 2001 of
$271,000 relates, to note repayments and purchase of Treasury Stock as compared
to $24,000 in the prior period ended June 30, 2000 which related to note
repayments.
At June 30, 2001, the Company had working capital of approximately
$12,276,000 and a current ratio of 4.3 to 1. In addition, as described in
Notes to Financial Statements, the Registrant's Handi-Pac subsidiary has
$1,654,000 of long-term debt outstanding. During the first quarter 1998, the
Company opened a limited credit facility with a bank for two subsidiaries which
includes a $300,000 sub-limit for direct borrowings and a $100,000 sub-limit for
documentary letters of credit all secured by certain of the Company's money
market funds. The Registrant considers its working capital, as described above,
to be more than adequate to handle its current operating capital needs.
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
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(a) The Annual Meeting of Shareholders was held on June 1, 2001.
(b)(c) (1) The proposal to re-elect the one Class A director was passed by a
vote of 11,288,059 shares in favor and 190,014 shares abstaining.
(2) The proposal to re-elect the three Class B directors was passed by
a vote of 528,630 shares in favor and 1,171 shares abstaining.
(3) There were no other proposals brought up at this meeting.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EXX INC
By: /s/ David A. Segal
-----------------------------
David A. Segal
Chairman of the Board
Chief Executive Officer
Chief Financial Officer
Date: August 10, 2001
11