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 March 31, 2001 or
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Transition report pursuant to Section 13 or 15(d) of the Securities
-------- Exchange Act of 1934
For the transition period from to
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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
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Number of shares of common stock outstanding as of March 31, 2001:
11,614,407 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 March 31, 2001 December 31, 2000
------ -------------- -----------------
(unaudited) (audited)
CURRENT ASSETS:
Cash and cash equivalents $ 7,962,000 $ 7,772,000
Short-term investments 602,000 599,000
Accounts receivable, less
allowances of $88,000
and $88,000 3,154,000 2,863,000
Inventories, at lower of cost or market:
Raw materials 591,000 979,000
Work in process 140,000 214,000
Finished goods 2,263,000 1,802,000
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2,994,000 2,995,000
Other current assets 295,000 356,000
Refundable income taxes - 152,000
Deferred income taxes 594,000 594,000
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TOTAL CURRENT ASSETS 15,601,000 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 6,444,000 6,444,000
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9,472,000 9,472,000
Less accumulated depreciation
and amortization 7,508,000 7,447,000
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1,964,000 2,025,000
Long Term Investments 1,010,000 526,000
Other assets 427,000 394,000
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TOTALS $ 19,002,000 $ 18,276,000
=================== ==================
See Notes to Financial Statements
2
A. Balance Sheets (continued)
LIABILITIES March 31, 2001 December 31, 2000
----------- -------------- -----------------
(unaudited) (audited)
CURRENT LIABILITIES:
Notes payable - current portion $ 63,000 $ 63,000
Accounts payable and other
current liabilities 3,504,000 3,657,000
Income taxes payable 49,000 -
------------------- ------------------
TOTAL CURRENT LIABILITIES 3,616,000 3,720,000
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LONG-TERM LIABILITIES:
Notes payable, less current portion 1,609,000 1,627,000
Pension liability 473,000 473,000
Deferred tax liability 380,000 185,000
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2,462,000 2,285,000
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STOCKHOLDERS' EQUITY
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 (638,000) (929,000)
Retained earnings 11,082,000 10,691,000
Less Treasury Stock at cost: (317,000) (288,000)
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TOTAL STOCKHOLDERS' EQUITY 12,924,000 12,271,000
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TOTALS $ 19,002,000 $ 18,276,000
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See Notes to Financial Statements
3
B. Statements of Income
For the Three-Month Period Ended
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March 31, 2001 March 31, 2000
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Net sales $ 4,978,000 $ 5,420,000
Cost of sales 3,464,000 3,258,000
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Gross profits 1,514,000 2,162,000
Selling, general and
administrative expenses 989,000 1,062,000
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Operating income 525,000 1,100,000
Interest expense 48,000 25,000
Other income 115,000 95,000
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Income before provision
for income taxes 592,000 1,170,000
Provision for income taxes 201,000 398,000
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Net income $ 391,000 $ 772,000
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Net income per common share
Basic $ .03 $ .06
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Diluted $ .03 $ .06
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Weighted average shares outstanding
Basic 12,254,681 12,686,560
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Diluted 12,310,810 13,788,832
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See Notes to Financial Statements
4
C. Statements of Cash Flow
For the Three-Month Period Ended
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March 31, 2001 March 31,2000
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Operating activities:
Net income $391,000 $772,000
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and Amortization 61,000 68,000
Provision for bad debts 1,000 --
Accrued interest income -- (51,000)
Increase (decrease) in cash attributable to changes in
assets and liabilities:
Accounts receivable (292,000) 48,000
Inventories 1,000 (452,000)
Other current assets 61,000 (230,000)
Refundable income taxes 152,000 111,000
Other assets (33,000) 204,000
Accounts payable and other
current liabilities (154,000) (492,000)
Income taxes payable 49,000 77,000
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Net cash provided by operating activities 237,000 55,000
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Cash flows from investing activities:
Purchase of property and equipment -- (75,000)
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Net cash provided by (used in) investing activities -- (75,000)
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Cash flows (used in) financing activities:
Payments on notes payable (18,000) (12,000)
Purchases of Treasury Stock (29,000) --
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Net cash (used in) financing activities (47,000) (12,000)
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Net increase (decrease) in cash and cash equivalents 190,000 (32,000)
Cash and cash equivalents
beginning of period 7,772,000 2,315,000
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Cash and cash equivalents,
end of period $7,962,000 $2,283,000
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See Notes to Financial Statements
5
C. Statements of Cash Flow (continued)
For the Three-Month Period Ended
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March 31, 2001 March 31, 2000
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Supplemental disclosure of cash flow information:
Cash Paid during the year for:
Interest $48,000 $25,000
Income taxes 2,000 16,000
Supplemental schedule of non-cash investing and financing activities:
NONE
See Notes to Financial Statements
6
D. Notes to Financial Statements
Note 1: The unaudited financial statements as of March 31, 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
disclosure normally included in financial statements in accordance with
generally accepted accounting principles have been condensed or omitted. The
reader is referred to the audited consolidated financial statements and notes
thereto included in the Registrant's Annual Report on Form 10-K for the year
ended December 31, 2000.
Note 2: Notes Payable
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Notes Payable represents obligations of the Handi-Pac subsidiary as
follows:
March 31, 2001
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Notes Payable - SBA Loans $ 846,000
Capital Lease payable 826,000
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1,672,000
Current Portion of Long-Term Debt 63,000
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$ 1,609,000
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During the first quarter 1998, the Company opened a limited credit
facility with a bank for two subsidiaries which includes a $300,000 sub-limit
for direct borrowings and a $150,000 sub-limit for documentary letters of credit
all secured by certain of the Company's money market funds.
As of March 31, 2001, there was no other bank debt for the other
subsidiaries except as noted above.
Note 3: Effective March 30, 1998, options to purchase 1,900,000 shares of
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Class A and 100,000 shares of Class B stock were issued to the Chief Executive
Officer in accordance with an agreement between the Company and the Chief
Executive Officer canceling the officer's right to have the Company purchase all
or any part of the shares of the Company owned by the Chief Executive Officer
and/or members of his family.
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Note 4: Stock Dividend
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Effective March 8, 2000, the Company paid a 400% stock dividend to all
shareholders of the Company's Class A and B common stock of record as of
December 16, 1999. The dividend was four shares of the Company's Class A common
stock for each share of Class A and/or Class B common stock owned by a
shareholder. All transactions and disclosures in the consolidated financial
statements, related to the Company's Class A and Class B common stock have been
restated to reflect the effects of the stock dividend. In addition, at the time
of this transaction, the Company retired the Treasury Stock in its possession,
namely 5,591,407 Class A shares and 304,153 Class B shares.
Note 5: Comprehensive Income
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Comprehensive Income is as follows:
For the Three-Month Period Ended
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March 31, 2001 March 31, 2000
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Net income $ 391,000 $ 772,000
Unrealized gains on debt and equity
securities net of taxes: 291,000 158,000
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Comprehensive Income $ 682,000 $ 930,000
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Note 6: The following information is reported as required for industry segment
------- disclosure.
Three Months Ended March 31, 2001
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Mechanical
Equipment Toy Corp. Consolidated
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Sales $2,840,000 $2,138,000 $ -- $4,978,000
=========== =========== =========== ===========
Operating income (loss) $346,000 $320,000 $(141,000) $525,000
Interest expense -- (23,000) (25,000) (48,000)
Interest income 6,000 -- 93,000 99,000
Other income 11,000 5,000 -- 16,000
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Income before income taxes $363,000 $302,000 $(73,000) $592,000
=========== =========== =========== ===========
Three Months Ended March 31, 2001
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Mechanical
Equipment Toy Corp. Consolidated
--------- --- ----- ------------
Sales $3,592,000 $1,828,000 $ -- $5,420,000
=========== =========== =========== ===========
Operating income (loss) $995,000 $239,000 $(134,000) $1,100,000
Interest expense -- (25,000) -- (25,000)
Interest income 11,000 -- 76,000 87,000
Other income 6,000 2,000 -- 8,000
----------- ----------- ----------- -----------
Income before income taxes $1,012,000 $216,000 $(58,000) $1,170,000
=========== =========== =========== ===========
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ITEM 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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The following management's discussion and analysis of results of operations
and financial condition contains certain forward-looking statements which are
covered under the safe harbor provisions of the Private Securities Legislation
Reform Act of 1995 with respect to the Company's future financial performance.
Although EXX INC believes the expectations reflected in such forward-looking
statements are based on reasonable assumptions, it can give no assurance that
its expectations will be realized. Forward-looking statements involve known and
unknown risks which may cause EXX INC's actual results and corporate
developments to differ materially from those expected. Factors that could cause
results and developments to differ materially from EXX INC's expectations
include, without limitation, changes in manufacturing and shipment schedules,
delays in completing plant construction and acquisitions, new product and
technology developments, competition within each business segment, cyclicality
of the markets for the products of a major segment, litigation, significant cost
variances, the effects of acquisitions and divestitures, and other risks.
A. Results of Operations
Sales for the first quarter of 2001 were $4,978,000 compared to $5,420,000
in 2000, an 8% decrease. The Mechanical Equipment Group had total sales of
$2,840,000, which was a decrease of $752,000 or 21% less than the prior year's
$3,592,000. The Toy Segment reflected a sales increase of 17% to $2,138,000 from
$1,828,000 in 2000.
Gross profits for the first quarter 2001 totaled $1,514,000 compared to
$2,162,000 for the comparable period in 2000. Gross profits in the Mechanical
Equipment group decreased 46% between the years. The Toy group accounted for a
9% increase in gross profits between the years. Gross profits as a percentage of
sales decreased 10% overall because of the reduced sales and a lower gross
margin earned by the Mechanical Equipment group.
First quarter sales of the Mechanical equipment group reflect the reduction
in business in both the Motor and Telecommunications areas. This is consistent
with the economic climate and the current reduction in demand for our products.
We continue to try to increase our market penetration to increase demand for our
products.
While the first quarter Toy sales have increased from the prior year,
management does not believe this reflects a trend, but simply a catch-up from
the prior quarter. There have been no changes in the Toy industry to indicate
any upturn nor any new items which would help the industry as a whole.
Operating income was $525,000 in the first quarter of 2001 compared to an
operating income of $1,100,000 during the first quarter of 2000. The decrease in
operating income was due primarily to the reduction in operations of the
Mechanical Equipment Group discussed above.
Interest expense was $48,000, compared to $25,000 the same period last
year.
The net income for the first quarter of 2001 was $391,000 or 3 cents per
share (basic and diluted) compared to a net income of $772,000 or 6 cents per
share (basic and diluted) in the comparable period of 2000.
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B. Liquidity and Capital Resources
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For the three months ended March 31, 2001, the Company generated $237,000
from operating activities as compared to generating $55,000 in the corresponding
period of the preceding year. For the three months ended March 31, 2001, the
Company did not utilize funds for investing activities. In the corresponding
period of the preceding year, the Company used $75,000 for investing activities,
principally for the purchase of equipment. Cash flows totaling $47,000 were used
in financing activities during the three months ended March 31, 2001 principally
for the purchase of treasury stock, compared to $12,000 for the three months
ended March 31, 2000 which related to the payments on notes payable.
At March 31, 2001, the Company had working capital of approximately
$11,985,000 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 $846,000 of
long-term debt outstanding with the SBA. During the first quarter 1998, the
Company opened a limited credit facility with a bank for two subsidiaries which
includes a $300,000 sub-limit for direct borrowings and a $150,000 sub-limit for
documentary letters of credit all secured by certain of the Company's money
market funds. The Registrant considers its working capital, as described above,
to be more than adequate to handle its current operating capital needs.
PART II. OTHER INFORMATION
Not applicable.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EXX INC
By: /s/ David A. Segal
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David A. Segal
Chairman of the Board
Chief Executive Officer
Chief Financial Officer
Date: May 11, 2001
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