SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
TRANSITION PERIOD OF ________ TO ________.
Commission File Number 0-20757
TRAVIS BOATS & MOTORS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-2024798
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5000 Plaza on the Lake, Suite 250, Austin, Texas 78746
(Address of principal executive offices)
Registrant's telephone number, including area code: (512) 347-8787
13045 Research Blvd., Austin, Texas 78750, (512) 250-8103
(Registrant's former address and telephone number,
if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
(Title of class)
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 preceeding 12 months (or for such shorter period that
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 the number of shares outstanding of each of the issuer's classes of
Common Stock as of the latest practicable date.
Common Stock $.01 par value - 4,136,506 shares as of July 31, 1997.
<PAGE>
Item 1. Financial Statements
Travis Boats & Motors, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
( in thousands, except share data )
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
-------- -----------
(unaudited)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $3,688 $1,533
Accounts receivable 6,085 1,331
Inventories 29,281 20,554
Prepaid expenses/other 252 263
------ ------
Total current assets 39,306 23,681
Property and equipment:
Land 1,816 1,816
Buildings and improvements 5,901 4,909
Furniture, fixtures and equipment 2,619 1,847
------ ------
10,336 8,572
Less accumulated depreciation (2,552) (2,025)
------- -------
7,784 6,547
Intangibles and other assets :
Goodwill & noncompete agreements, net 2,483 1,063
Other assets 239 59
------- -------
Total assets $49,812 $31,350
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,338 $240
Accrued liabilities 2,721 1,389
Federal & state income taxes payable 1,377 953
Unearned revenue 885 1,174
Current portion of notes payable and other 15,842 4,661
short-term obligations ------ -----
Total current liabilities 22,163 8,417
Notes payable, less current portion 6,304 4,335
Stockholders' equity
Common Stock, $.01 par value, 50,000,000 authorized
4,136,506 issued and outstanding at June 30,1997
and September 30, 1996, respectively 41 41
Paid-in capital 11,527 11,527
Retained earnings 9,777 7,030
------- -------
Total stockholders' equity 21,345 18,598
------- -------
Total liabilities and stockholders' equity $49,812 $31,350
======= =======
</TABLE>
See notes to unaudited condensed consolidated financial statements
<PAGE>
Travis Boats & Motors, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except share data and stores open)
<TABLE>
<CAPTION>
Three months ended Nine months ended
June 30, June 30,
1997 1996 1997 1996
------- -------- -------- -------
<S> <C> <C> <C> <C>
Net sales...................................... $37,348 $26,445 $67,072 $48,462
Cost of goods sold............................. 27,817 19,832 49,796 36,278
------- ------- ------- -------
Gross profit................................... 9,531 6,613 17,276 12,184
Selling, general and administrative............ 5,426 3,767 11,204 8,068
Depreciation and amortization.................. 232 141 653 404
------- ------- ------- -------
5,658 3,908 11,857 8,472
Operating income............................... 3,873 2,705 5,419 3,712
Interest expense............................... (412) (424) (1,041) (1,092)
Other income................................... (1) 17 (9) 49
------- ------- ------- -------
Income before income taxes..................... 3,460 2,299 4,369 2,669
Provision for income taxes..................... 1,288 883 1,621 1,010
------- ------- ------- -------
Net Income..................................... $2,172 $1,416 $2,748 $1,659
======= ======= ======= =======
Net Income per common share.................... 0.53 0.52 0.66 0.61
Weighted average common shares outstanding..... 4,136,506 2,741,193 4,136,506 2,702,661
========= ========= ========= =========
Stores open at end of period................... 16 12 16 12
========= ========= ========= =========
</TABLE>
<PAGE>
Travis Boats & Motors, Inc.and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flow
(in thousands)
<TABLE>
<CAPTION>
Nine months ended
June 30,
1997 1996
------ ------
<S> <C> <C>
Operating activities:
Net Income $2,748 $1,659
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization......................... 653 404
Changes in operating assets and liabilities
(Increase) in amounts due from underwriters........ 0 (10,286)
(Increase) in accounts receivable.................. (4,754) (3,019)
(Increase) in prepaid assets....................... (36) (56)
(Increase) in inventories.......................... (5,056) (8,454)
(Increase) in other assets......................... (180) (3)
Decrease in deferred tax asset..................... 0 60
Increase/(decrease) in accounts payable............ 1,098 (17)
Increase in accrued liabilities.................... 1,332 794
Increase/(decrease) in income taxes payable........ 424 73
Increase/(decrease) in unearned revenue............ (289) 1,947
------ -------
Net Cash used in by operating activities.............. (4,060) (16,898)
Investing Activities:
Purchase of businesses................................ (2,519) (88)
Purchase of property and equipment.................... (1,344) (1,100)
------ -------
Net cash used in investing activities (3,863) (1,188)
Financing activities:
Net increase in notes payable and other short term obl 10,078 6,913
Issuance of common stock 0 9,578
------ -------
Net cash provided by financing activities............. 10,078 16,491
Increase/(decrease) in cash and cash equivalents...... 2,155 (1,595)
Cash and cash equivalents, beginning of period........ 1,533 996
------ -------
Cash and cash equivalents, end of period.............. $3,688 ($599)
====== =======
</TABLE>
See notes to unaudited condensed consolidated financial statements
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared from the records of Travis Boats & Motors, Inc. and subsidiaries
(collectively, the Company) without audit. In the opinion of management,
such financial statements include all adjustments (consisting of only
recurring accruals) necessary to present fairly the financial position at June
30, 1997; and the interim results of operations and cash flows for the nine
month periods ended June 30, 1997 and 1996. The condensed consolidated balance
sheet at September 30, 1996, presented herein, has been prepared from the
audited consolidated financial statements of the Company for the fiscal year
then ended.
Accounting policies followed by the Company are described in Note 1 to the
audited consolidated financial statements for the fiscal year ended September
30, 1996. Certain information and footnote disclosures normally included in
financial statements have been condensed or omitted for purposes of the
condensed consolidated interim financial statements. The condensed
consolidated financial statements should be read in conjunction with the
audited consolidated financial statements, including the notes thereto, for
the fiscal year ended September 30, 1996.
The results of operations for the nine month period ended June 30, 1997 are
not necessarily indicative of the results to be expected for the full year.
NOTE 2 - NET INCOME PER COMMON SHARE
Net income per common share is based on the weighted average number of common
shares outstanding during the periods. The effect of the Common Stock
equivalents is not significant.
NOTE 3 - INITIAL PUBLIC OFFERING OF COMMON STOCK
On June 27, 1996, the Company consummated an initial public offering of
1,890,500 shares of Common Stock at the price of $9.00 per share. Of the
1,890,500 shares sold, 1,453,000 shares were sold by the Company (including
140,500 shares sold pursuant to an over-allotment option) and 437,500 shares
were sold by certain shareholders. Net proceeds to the Company were
approximately $11.5 million.
NOTE 4 - STOCKHOLDERS' EQUITY
In November 1995, the Board of Directors of the Company approved a 15 for 1
stock dividend for stockholders of record as of November 8, 1995.
Effective December 14, 1995, the Company changed the stated par value of each
share of common stock from $.10 to $.01. The condensed consolidated financial
statements have been restated to retroactively reflect the change in par
value.
In May 1996, the Board of Directors of the Company approved a 1 for 3 stock
dividend for stockholders of record as of May 3, 1996. All share amounts
presented in these condensed consolidated financial statements have been
restated retroactively to reflect the above stock dividends and change in par
value.
<PAGE>
NOTE 5 - ACQUISITIONS
Clay's Boats and Motors, Inc. ("Clay's")
Effective December 1, 1995, the Company acquired certain assets of Clay's
Boats and Motors, Inc. in New Iberia, Louisiana. The assets acquired included
furniture, fixtures and equipment, parts and accessories inventory, all
leasehold improvements and certain other assets. The purchase price was
$328,741, of which $262,687 was paid in cash and $66,054 was financed by the
issuance of a note payable to the seller.
The acquisition has been accounted for using the purchase method of accounting
and, accordingly, the operating results of Clay's have been included in the
consolidated financial statements from the date of acquisition. The purchase
price ($328,741) has been allocated to the tangible net assets acquired
($240,669) based on their respective fair values at the date of acquisition.
The resulting excess purchase price ($88,072) was allocated to non-compete
agreements and goodwill.
North Alabama Watersports, Inc. ("NAWS")
Effective October 3, 1996, the Company acquired certain assets of North
Alabama Watersports, Inc. in Florence, Alabama. This acquisition included
boat, motor and trailer inventory, parts and accessories inventory, and
furniture, fixtures and equipment. The purchase price was $892,255, of which
$79,707 was financed by the issuance of a note payable to the seller.
The acquisition has been accounted for using the purchase method of accounting
and, accordingly, the operating results of NAWS have been included in the
consolidated financial statements from the date of acquisition. The purchase
price ($892,255) has been allocated to the tangible net assets acquired
($687,255) based on their respective fair values at the date of acquisition.
The resulting excess purchase price ($205,000) was allocated to noncompete
agreements and goodwill.
Tri-Lakes Marine, Inc. ("Tri-Lakes")
Effective November 1, 1996, the Company acquired certain assets of Tri-Lakes
Marine, Inc. with retail store locations in Tennessee and Alabama. This
acquisition included boat, motor and trailer inventory, parts and accessories
inventory, and furniture, fixtures and equipment. The purchase price was
$1,242,924, of which $642,924 was paid in cash and $600,000 was financed by
the issuance of notes payable to the seller.
The acquisition has been accounted for using the purchase method of accounting
and, accordingly, the operating results of Tri-Lakes have been included in the
consolidated financial statements from the date of acquisition. The purchase
price ($1,242,924) and liabilities assumed ($1,937,279) have been allocated to
the tangible net assets acquired ($2,536,092) based on their respective fair
values at the date of acquisition. The resulting excess purchase price
($644,111) was allocated to noncompete agreements and goodwill.
Bent's Marine, Inc. ("Bent's")
Effective February 19, 1997, the Company acquired certain assets of Bent's
Marine, Inc. in Metairie, Louisiana. This acquisition included boat, motor
and trailer inventory, parts and accessories inventory, and furniture,
fixtures and equipment. The purchase price was $1,518,550, of which
$1,063,671 was paid in cash and $454,879 was financed by the issuance of a
note payable to the seller.
<PAGE>
The acquisition has been accounted for using the purchase method of accounting
and, accordingly, the operating results of Bent's have been included in the
consolidated financial statements from the date of acquisition. The purchase
price ($1,518,550) has been allocated to the tangible assets acquired
($839,627) based on their respective fair values at the date of acquisition.
The resulting excess purchase price ($678,923) was allocated to noncompete
agreements and goodwill.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
General
- -------
Travis Boats & Motors, Inc. (''Travis Boats'' or the ''Company'') is a leading
multi-state superstore retailer of recreational boats, motors, trailers and
related marine accessories in the southern United States. The Company, which
currently operates 16 stores under the name Travis Boating Center in Texas,
Arkansas, Louisiana, Alabama and Tennessee, differentiates itself from
competitors by providing customers a unique superstore shopping experience
that showcases a broad selection of high quality boats, motors, trailers and
related marine accessories at firm, clearly posted low prices. Each superstore
also offers complete customer service and support, including in-house
financing programs and full-service repair facilities staffed by factory-
trained mechanics.
Since its founding in 1979 as a single retail store in Austin, Texas, the
Company has grown both through acquisitions and the establishment of new store
locations. During the 1980's, the Company expanded into the Texas markets of
San Antonio, Midland, Dallas and Abilene. It was during this initial period of
expansion that the Company began developing the systems necessary to manage a
multi-store operation and leveraging the economies of scale associated with
volume purchasing. The Company's success in these areas led to the proprietary
Travis Edition packaging concept and the Company's pricing philosophy. Since
1991, Travis Boats has opened or acquired (through asset purchases) eleven
additional store locations within the following states: Texas (3), Arkansas
(2), Louisiana (3), Alabama (2) and Tennessee (1).
The Company sells over 40 different models of brand-name fishing, water-skiing
and general recreational boats, along with motors, trailers, accessories and
related equipment. Personal watercraft, off-shore fishing boats and cabin
cruisers are also offered for sale at selected store locations. The Company
custom designs and pre-packages combinations of popular brand-name boats, such
as Aquasport, Pro Line, Sea Ark and Larson, with Johnson outboard and other
motors, trailers and numerous accessories, under its proprietary Travis
Edition product line. These signature Travis Edition packages, which account
for the vast majority of total new boat sales, have been designed and
developed in coordination with the manufacturers and often include
distinguishing features and accessories that have historically been
unavailable to, or listed as optional by, many competitors. These factors
enable the Company to provide the customer with an exceptional product that is
competitively priced and conveniently packaged for immediate enjoyment.
The Company believes that it offers a selection of boat, motor and trailer
packages that fall within the price range of the majority of all boats, motors
and trailers sold in the United States. Although the Company sells boats
priced in excess of $100,000, the Company's product line generally consists of
boat packages priced from $7,500-$23,000 with approximate even distribution
within this price range. Management believes that by combining flexible
financing arrangements with an even distribution of products through a broad
price range, the Company is able to offer boat packages to customers with
different purchasing budgets and varying income levels.
<PAGE>
Results of Operations
- ---------------------
Quarter Ended, June 30, 1997 Compared to the Quarter Ended, June 30, 1996 and
Nine Months Ended, June 30, 1997 Compared to the Nine Months Ended June 30,
1996
Net sales. Net sales increased by 41.3% to $37.3 million in the third
quarter of fiscal 1997 from $26.4 million in the third quarter of fiscal 1996.
For the nine months ended, June 30, 1997, net sales increased by 38.4% to
$67.1 million from $48.5 million during the same period of the prior year. Of
the increases in net sales, approximately $1.8 million and $942,000 were
attributable to a 7.3% and 3.5% growth in comparable store sales for the
quarter (ten stores in base) and nine months (six stores in base) ended June
30 1997, respectively. For the quarter and nine months ended June 30, 1997,
respectively, approximately $9.5 million and $15.8 million of the increases in
net sales were related to the four store locations acquired thus far in fiscal
1997. General growth in overall sales volume was primarily the result of the
increased number of stores in operation during the periods, the participation
in additional season opening boat and recreation shows, volume client sales
derived from the newly acquired Winchester, Tennessee store and the growth in
comparable store sales. The Winchester store location has two distinct types
of sales - local retail (similar to the traditional Travis Boating Center
superstore) and volume client sales. Volume client sales are typically non-
packaged products (ie not Travis Editions) sold below the Company's standard
profit margins. It is anticipated that this location will be the only
existing store that will have a volume client sales component as a material
part of its operations.
Comparable store sales during the quarter and the nine months ended June 30,
1997 benefitted from the increased number of Travis Edition models offered
(including the addition of Pro Line boats, new deck boats by Larson, Sprint
and numerous aluminum models) and increased penetration levels of sales
related to finance and insurance products offered by the Company.
Comparable store sales have also benefitted from continued sales demand from
participation in offsite marketing events such as boat and recreation shows,
parking lot shows, open houses and in the water boat shows.
Historically, the Company's first fiscal quarter represents its slowest
quarter in terms of sales demand. This is historically followed a broad
seasonal increase in sales by both the Company and the industry as a whole in
the quarters ending on March 31 and June 30. The quarter ended June 30,
historically represents the peak sales demand for the Company.
Gross profit. Gross profit increased by 43.9% to $9.5 million in the third
quarter of fiscal 1997 from $6.6 million in the same quarter of fiscal 1996,
while gross profit as a percent of sales increased to 25.5% from 25.0% during
the same periods. For the nine months ended, June 30, 1997, gross profit
increased 41.8% to $17.3 million from $12.2 million in the same period of the
prior year, while the gross profit as a percent of sales increased to 25.8%
from 25.1%. These increases in gross profit as a percent of sales were
primarily related to enhanced revenues attributable to traditionally higher
gross profit sales categories such as: F&I income, over the counter sales of
parts & accessories and service labor, as well as an overall favorable mix of
boats sold. While the gross profit margin has reflected improvement as a
percent of sales, it has been offset somewhat by the sales to high volume
clients through the Winchester, Tennessee store location. During the recently
completed third quarter and nine months ended June 30, 1997, approximately
<PAGE>
$1.3 million and $3.1 million in sales, respectively, from the Winchester
store were volume client sales. However, the Winchester store is expected to
generate less than $5.0 million in volume client transactions during fiscal
1997, a level not expected to have a material impact on the Company's targeted
gross profit margin.
Net sales attributable to F&I Products, which have a significant impact on the
gross profit margin, contributed $1.6 million, or 16.8%, of total gross profit
in the third quarter of fiscal 1997, as compared to $1.1 million or 16.7%, of
total gross profit for the third quarter of the prior fiscal year. For the
nine months ended, June 30, 1997, net sales attributable to F&I Products
accounted for $3.0 million, or 17.3% of the total gross profit, compared to
$2.0 million or 16.4%, for the same period of the prior year. Net sales
attributable to F&I Products are reported on a net basis, therefore, all of
such sales contribute directly to the Company's gross profit. The costs
associated with the sale of F&I Products are included in selling, general and
administrative expenses.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by 42.1% to $5.4 million in third quarter of
fiscal 1997 from $3.8 million for the third quarter of fiscal 1996. Selling,
general and administrative expenses as a percent of net sales increased to
14.5% in the third quarter of fiscal 1997 from 14.2% for the third quarter of
fiscal 1996. This increase in selling, general and administrative expenses as
a percent of net sales was primarily attributable to, the start up costs
associated with the four stores acquired thus far in fiscal 1997, the
expenses associated with due-diligence on pending acquisitions
(see Pending Acquisitions) and the expenses of operating a larger
store base with an expanded regional market presence. Selling, general and
administrative expenses in actual dollars increased by 38.3% to $11.2 million
for the nine months ended June 30, 1997, versus $8.1 million in the same period
of the prior fiscal year. However, as a percent of net sales, selling, general
and administrative expenses for the nine months ended June 30, 1997 remained
flat at 16.7% from the same period of the prior year due primarily to the over-
all increase in net sales.
Depreciation and amortization expenses increased in the quarter and for the
nine months ended, June 30, 1997, primarily as a result of the acquisitions
which occurred thus far in fiscal 1997, and through the capitalization of costs
such as leasehold or building improvements associated with the conversion of
certain existing stores to superstore standards.
Interest expense. Interest expense, in actual dollars, decreased by 2.8% to
$412,000 in third quarter of fiscal 1997 from $424,000 in the third quarter of
fiscal 1996, while interest expense as a percent of net sales also decreased
to 1.1% in the third quarter of fiscal 1997 from 1.6% in the same quarter of
fiscal 1996. For the nine months ended June 30, 1997, interest expense
decreased to $1.0 million from $1.1 million in the same period of the prior
year, while interest expense as a percent of net sales declined to 1.6% from
2.3%. Effective with the funding of the Company's Initial Public Offering in
late June of 1996, the Company reduced certain revolving indebtedness and
certain long term indebtedness. This reduction in debt, a reduction in the
Company's revolving line of credit interest rate, and the seasonally increased
working capital have allowed the reduction in overall interest expense. See
"Liquidity and Capital Resources", "Seasonality".
<PAGE>
Net Income. The Company experienced a net income of $2.2 million for the
third quarter of fiscal 1997. This represents an increase of 57.1% from the
net income of $1.4 million in the third quarter of fiscal 1996. The net income
as a percent of sales was 5.8% and 5.4% for the third quarter of fiscal 1997
and 1996, respectively. For the nine months ended, June 30, 1997, net income
increased by 58.8% to $2.7 million from $1.7 million in the same period of the
prior year. The improved net income has been the result of the Company gener-
ating higher net sales levels while attaining higher gross profit margins,
containing selling, general and administrative expenses and reducing interest
expense both in terms of actual dollars and as a percentage of net sales.
Liquidity and Capital Resources
- -------------------------------
The Company's short-term cash needs are primarily for working capital to
support operations, including inventory requirements, off-season liquidity and
store expansion. These short-term cash needs have historically been financed
with cash from operations and borrowings under the Company's credit
facilities. At June 30, 1997, the Company had working capital of $17.1
million, including $6.1 million in accounts receivable (primarily contracts in
transit from sales) and $29.3 million in inventories, offset by approximately
$4.1 million of accounts payable and accrued liabilities, and $18.1 million in
other short-term liabilities including revolving/floorplan credit lines
outstanding ($15.8 million) and, unearned income ($885,000). As of June 30,
1997, the aggregate maximum borrowing limits under floor plan and revolving
lines of credit were approximately $45.0 million, of which the Company was
eligible to borrow approximately $30.0 million pursuant to the Company's
borrowing formula.
Operating activities utilized cash flows of $4.0 million for the first nine
months of fiscal 1997 due primarily to the net increases of $5.1 million in
inventories and $4.8 million in accounts receivable. The third quarter historic-
ally represents the peak selling season for the Company (see "Seasonality").
Inventory growth traditionally slows during the third quarter and generally
falls to an annual low point during the fourth fiscal quarter. In the
fourth quarter, inventory model year change occurs and inventory commitments
and allocations are typically finalized for the next year's selling season.
The Company used net cash in investing activities of approximately $3.9 mil-
lion in the first nine months of fiscal 1997. During the first nine months of
fiscal 1997, the Company acquired substantially all of the assets of North
Alabama Watersports, Inc., Tri-Lakes Marine, Inc. and Bent's Marine, Inc. which
accounted for approximately $2.5 million of investing activities. The
Company also acquired its facility in Beaumont, Texas, renovated its Midland,
Texas store to superstore standards and updated certain facilities with its
standard superstore trade dress awnings and neon. Certain sellers in the
recent acquisitions have provided long term debt at fixed interest rates in
connection with those acquisitions. The remaining acquisition and other capital
expenditures have been substantially financed with advances made under the
Company's revolving credit lines and from working capital.
Financing activities for the nine months ended June 30, 1997 provided $10.1
million of cash flows primarily from the net proceeds of advances under the
Company's revolving and floorplan lines of credit. These advances were used
to fund the increase in inventories, certain acquisition related expenses and
other capital expenditures. Effective December 12, 1996, the Company entered
into a $15.0 million revolving line of credit agented by NationsBank of Texas,
N.A. This credit facility replaced the previously existing floor plan lines of
credit and revolving credit lines totalling approximately $13.8 million with
Hibernia National Bank and NationsBank. The line provides for borrowing pursuant
to a borrowing formula based upon certain of the Company's inventory and account
receivables. Collateral consists of a security interest in specific inventories
(and proceeds thereof), accounts receivable and contracts in transit. The line
is annually renewable with the initial maturity on October 31, 1997. Pricing
is at the prime rate minus .375%, with a fee of .125% on the unfunded portion
to be assessed quarterly. A comprehensive loan agreement governs the line of
credit. The loan agreement contains financial covenants regulating debt service
coverages, tangible net worth, operating leverage and restrictions on
dividends or distributions. As of June 30, 1997, $5.0 million was drawn on the
revolving line and management believes the Company to be in compliance with
the terms and conditions of this loan agreement. By a conditional term sheet
dated as of May 20, 1997, NationsBank of Texas, N.A. has provided the Company
with a written commitment to increase the revolving line from $15.0 million to
$40.0 million under substantially the same existing terms and conditions.
<PAGE>
The Company also maintains floor plan lines of credit with various finance
companies providing approximately $25.0 million in credit limits. These floor
plan lines generally have no stated maturity and utilize subsidies from
manufacturers to provide for certain interest free periods each calendar year
(usually August through May). Certain of these floor plan lines of credit with
finance companies are governed by loan agreements containing various financial
covenants concerning, among others, ratios governing tangible net worth and
leverage. As of June 30, 1997, approximately $10.8 million was outstanding
under these floor plan lines and management believes the Company was in
compliance with the terms and conditions of these loan agreements.
Merchandise inventories were $29.3 million and $20.6 million as of June 30,
1997 and September 30, 1996, respectively. Costs in excess of net assets
acquired increased by approximately $1.5 million to $2.5 million in the
first nine months of fiscal 1997 due to the acquisitions of the additional
four store locations thus far in fiscal 1997.
The Company's revolving credit facility, floor plan lines of credit and
internally generated working capital are expected by the Company's management
to be sufficient to meet the Company's cash requirements at least through the
remainder of fiscal 1997 and fiscal 1998.
Seasonality
- -----------
The Company's business, as well as the sales demand for various types of
boats, tends to be highly seasonal. Strong sales typically begin in January
with the onset of the public boat and recreation shows, and continue through
July. During the fiscal year and the 12 months ended September 30, 1996 and
1995, respectively, net sales for the quarterly periods ended March 31 and
June 30 represented in excess of 29% and 39%, respectively, of the Company's
annual net sales. With regard to net income, the Company historically
generates profits in three of its fiscal quarters and experiences operating
losses in the quarter ended December 31 due to a broad seasonal slowdown in
sales. During the quarter ended September 30, inventory typically reaches its
lowest levels and accumulated cash reserves reach the highest levels. During
the quarter ended December 31, the Company generally builds inventory levels
in preparation for the selling season which begins with boat and recreation
shows occurring in January and February in certain market areas in which the
Company conducts business. Travis Boats' operating results would be materially
and adversely affected if net sales were to fall significantly below
historical levels during the months of January through June.
<PAGE>
Pending Acquisitions
- --------------------
On June 30, 1997, the Company released a press report that in conjunction with
the planned opening of a 'de novo' store location in Pascagoula, Mississippi,
it had entered into a Definitive Purchase Agreement to acquire certain Pro-
Line, Donzi, Sprint and Polar boat inventory and related assets for cash consid-
eration from a pleasure boat retailer in Pascagoula. The total purchase price is
expected to be approximately $1.0 million.
On June 30, 1997, the Company released a press report that it had entered into
conditional letters of intent to acquire Adventure Marine & Outdoors, Inc.
(Adventure Marine), Adventure Boat Brokerage, Inc. (Adventure Brokerage)
and Adventure Marine South, Inc. (Adventure South) for common stock of
Travis Boats & Motors, Inc. and other cash consideration. Newly issued common
stock of Travis Boats will be exchanged for all outstanding common stock in Ad-
venture Marine, Adventure Brokerage and Adventure South on the date of closing.
The amount of common stock exchanged by Travis will be based upon the value of
the assets acquired less the liabilities assumed by Travis (the "net assets").
The net assets are expected to be approximately $2.0 million and the Travis
common stock will be valued based upon the average closing price for the twenty
(20) days prior to closing of the transaction. Travis will also pay an amount
of approximately $2.250 million cash in excess of the net assets. Adventure
Marine and Adventure Brokerage operate store locations in Ft. Walton Beach,
Florida and Adventure South operates a store location in Key Largo, Florida.
The transaction is expected to close in fiscal 1997.
Reliance on Manufacturers and Other Key Vendors
- -----------------------------------------------
The Company's success is dependent upon its relationship with, and favorable
pricing relationships from, a limited number of major manufacturers. In the
event these arrangements were to change or terminate for any reason, including
changes in competitive, regulatory or marketing practices, the Company's
business, financial condition and results of operations could be adversely
affected.
As is typical in the industry, the Company deals with each of its
manufacturers pursuant to a cancellable, annually renewable, non-exclusive,
dealer agreement that does not contain any contractural provisions concerning
product pricing or required purchasing levels. Pricing is generally
established on a model year basis, but is subject to change at the
manufacturer's sole discretion.
The Company purchased approximately 100% of its outboard motors in fiscal
years 1995 and 1996 from Outboard Marine Corporation ("OMC"), the manufacturer
of Johnson outboard motors. Unlike the Company's other dealer agreements, the
Company's agreement with OMC is multi-year in nature. This agreement, which
is in the second of three years, sets forth an established discount level from
the then prevailing dealer net price over the entire term of the agreement.
This dealer agreement may be canceled by either party if the volume of product
purchased or available to be purchased is not maintained at pre-established
levels. Both Travis and OMC have fulfilled such pre-established levels as of
the date of this report on Form 10Q. If the Company's contract with OMC were
canceled or modified, it could have a material adverse effect on the Company's
business, financial condition and results of operations.
On Friday, April 28, 1997, OMC released a press report concerning its
operating results for the first six months of its current fiscal year. OMC
reported an operating loss for both its first and second fiscal quarters. The
Company further announced that its Board had retained its investment banking
firm to seek alternative new sources of capital.
On Wednesday July 9, 1997, OMC released a press report stating that the
company had agreed to be acquired by Detroit Diesel Corp., a unit of Penske
Corp. for $16 per share in cash and stock, subject to a tender offer. On Monday
August 6, 1997, Detroit Diesel Corp. extended its tender offer for an additional
two weeks.
<PAGE>
On Thursday August 7, 1997, OMC released a press report stating that Greenway
Partners L.P., had made a competing tender offer for $18 per share for OMC. The
Greenway tender offer is scheduled to expire on Monday September 8, 1997. As of
the date of this report, Travis is not aware of any public comments by OMC re-
garding the tender offer by Greenway Partners, L.P.
Travis Boats management does not believe that a new owner or financial partner
for OMC will prove detrimental to or result in the termination of its
longstanding relationship with the company. Travis Boats believes that it is
the largest volume purchaser of products from OMC and believes that
alternative product suppliers exist, if necessary, for a high volume
purchasing client such as Travis Boats. Although the Company believes that
adequate alternate sources of motors would be available that could replace OMC,
there can be no assurance that such alternate manufacturers will be available
at the time of any future interruption, or that alternative products will be
available at comparable quality and prices. While it is not known what impact
OMC's financial condition will have upon Travis, if any, as of the date of
this report Travis Boats has not had any material difficulties in obtaining
necessary product from OMC and further believes that existing stock in
addition to planned upcoming deliveries will be sufficient to meet demand
throughout the current model year's selling season.
On Friday, April 25, 1997, Mastercrafters Corporation, of Winnsboro,
Louisiana, announced that it had halted production in its only plant facility
and that it would seek to find a buyer for certain of its assets including its
trade name, Cajun Boats. Mastercrafters Corporation is a subsidiary of Genmar
Holdings, Inc. which also owns and manufacture's the Larson and Aquasport boat
lines which the Company sells as part of its Travis Edition line.
Approximately 22% of the Company's net inventory purchases in fiscal 1996 were
from Genmar and was comprised of boats from its Aquasport, Larson and Cajun
subsidiaries. As a result of the interruption in Mastercrafters Corporation's
production, the Company may experience temporary product shortfalls,
disruptions or delays with respect to any unfilled purchase orders as well as
intended upcoming purchase orders which would have been outstanding as of the
date production was halted. Although the Company believes that it has
sufficient stock on hand to substantially meet current model year's market
demands and that adequate alternative sources will be available to absorb the
lack of Mastercrafters' production, there can be no assurance that such
alternate sources will be available in a timely manner or that such products
will be available at comparable quality and prices.
Effect of Newly Issued Accounting Standards
- -------------------------------------------
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior periods.
Under the new requirements for calculating primary earnings per share, the
dilutive effect of stock options will be excluded. The impact of Statement
128 on the calculation of primary and fully diluted earnings per share for
these quarters is not expected to be material.
<PAGE>
Cautionary Statement for purposes of the Safe Harbor Provisions of the Private
- ------------------------------------------------------------------------------
Securities Litigation Reform Act of 1995.
- -----------------------------------------
Other than statements of historical fact, all statements contained in this
quarterly Report on Form 10-Q or in documents incorporated herein may contain
forward-looking statements. Forward-looking statements in this Report
generally are accompanied by words such as ''anticipate,'' ''believe,''
''estimate,'' ''project,'' ''of the opinion that,'' ''expect'' or similar
statements. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, no assurance can be given that
such expectations are accurate. Factors that could cause the Company's results
to differ materially from the results discussed in such forward-looking
statements include the risks described under ''Risk Factors'' in the Report on
Form 10-K filed by the Company for the fiscal year ended September 30, 1996
and the Registration Statement filed on Form S-1 filed in conjunction with the
Company's initial public offering in June of 1996. All forward-looking
statements in this 10-Q Report are expressly qualified in their entirety by
the cautionary statements in this paragraph and the referenced filings.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8 - K
(a) Exhibits
None
(b) Reports on Form 8 - K
No reports on Form 8 - K have been filed during the quarter for which
this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
Date: August 13, 1997 Travis Boats & Motors, Inc.
By:______________________________
Michael B. Perrine
Chief Financial Officer, Treasurer and Secretary
(Principal Accounting and Financial Officer)
<PAGE>
[ARTICLE] 5
[MULTIPLIER] 1,000
<PERIOD TYPE> 9-MOS 12-MOS
<FISCAL YEAR-END> SEP-30-97 SEP-30-96
[PERIOD-START] OCT-01-96 OCT-01-95
[PERIOD-END] JUN-30-97 SEP-30-96
[CASH] 3,688 1,533
[SECURITIES] 0 0
[RECEIVABLES] 6,085 1,331
<ALLOWOWANCES> 0 0
[INVENTORY] 29,281 20,554
[CURRENT-ASSETS] 39,306 23,681
[PP&E] 10,336 8,572
[DEPRECIATION] 2,552 2,025
[TOTAL-ASSETS] 49,811 31,350
[TOTAL-LIABILITIES] 28,466 12,752
[BONDS] 6,304 4,335
[PREFERRED-MANDATORY] 0 0
[COMMON] 41 41
[OTHER-SE] 21,305 18,557
[TOTAL-LIABILITY-AND-EQUITY] 49,811 31,350
[SALES] 67,072 64,555
[TOTAL-REVENUES] 67,072 64,555
[CGS] <49,796> <48,072>
[TOTAL-COSTS] <49,796> <48,072>
[OTHER-EXPENSES] <11,857> <11,421>
[LOSS-PROVISION] 0 0
[INTEREST-EXPENSE] <1,041> <1,289>
[INCOME-PRETAX] 4,369 3,833
[INCOME-TAX] <1,621> <1,450>
[INCOME-CONTINUING] 2,748 2,383
[DISCONTINUED] 0 0
[EXTRAORDINARY] 0 0
[CHANGES] 0 0
[NET-INCOME] 2,748 2,383
[EPS-PRIMARY] .66 .78
[EPS-DILUTED] .66 .78
