<PAGE>
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 March 31, 1998
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
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 preceding 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 - 4,253,671 shares as of May 15, 1998.
<PAGE>
Item 1. Financial Statements
Travis Boats & Motors, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
( in thousands, except share data )
<TABLE>
<CAPTION>
March 31, September 30,
1998 1997
(unaudited)
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $8,995 $5,816
Accounts receivable 9,135 3,915
Inventories 57,538 34,450
Prepaid expenses and other 1,238 544
Total current assets 76,906 44,725
Property and equipment:
Land 1,991 1,991
Buildings and improvements 7,006 6,366
Furniture, fixtures and equipment 3,627 3,162
12,624 11,519
Less accumulated depreciation (3,177) (2,750)
9,447 8,769
Intangibles and other assets :
Goodwill and noncompete agreements, net 5,688 5,376
Other assets 326 251
Total assets $92,367 $59,121
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,978 $2,238
Accrued liabilities 3,591 4,631
Federal and state income taxes payable 1,604 1,081
Unearned revenue 2,024 522
Current portion of notes payable and other
short-term obligations 53,473 21,447
Total current liabilities 62,670 29,919
Notes payable, less current portion 4,664 5,145
Stockholders' equity
Common Stock, $.01 par value, 50,000,000 authorized,
4,224,867 and 4,253,671 issued and outstanding at
September 30, 1997 and March 31, 1998, respectivly 43 42
Paid-in capital 13,337 13,004
Retained earnings 11,653 11,011
Total stockholders' equity 25,033 24,057
Total liabilities and stockholders' equity $92,367 $59,121
</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 Six months ended
March 31, March 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net sales...................................... $33,427 $24,273 $43,569 $29,724
Cost of goods sold............................. 24,323 17,869 31,854 21,979
Gross profit................................... 9,104 6,404 11,715 7,745
Selling, general and administrative............ 5,294 3,638 8,988 5,778
Depreciation and amortization.................. 346 237 679 421
5,640 3,875 9,667 6,199
Operating income............................... 3,464 2,529 2,048 1,546
Interest expense............................... (578) (415) (1,039) (629)
Other income/(expense)......................... 14 (6) 27 (9)
Income before income taxes..................... 2,900 2,108 1,036 908
Provision for income taxes..................... 1,102 788 394 332
Net Income..................................... $1,798 $1,320 $642 $576
Basic Earnings Per Share....................... $0.42 $0.32 $0.15 $0.14
Diluted Earnings Per Share..................... $0.41 $0.31 $0.15 $0.14
Weighted average common shares outstanding..... 4,253,545 4,136,506 4,241,588 4,136,506
Weighted average dilutive common shares outstan 4,423,316 4,239,627 4,405,348 4,239,673
Stores open at end of period................... 22 16 22 16
</TABLE>
See notes to unaudited condensed consolidated financial statements
<PAGE>
Travis Boats & Motors, Inc.and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flow
(in thousands)
<TABLE>
<CAPTION>
Six months ended
March 31,
1998 1997
<S> <C> <C>
Operating activities:
Net Income $642 $576
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization......................... 679 421
Changes in operating assets and liabilities
(Increase) in accounts receivable.................. (5,220) (4,720)
(Increase) in prepaid expenses..................... (694) (68)
(Increase) in inventories.......................... (21,301) (11,144)
(Increase) in other assets......................... (75) (7)
Increase in accounts payable....................... (289) 669
Increase in accrued liabilities.................... 390 852
Increase/(Decrease) in income taxes payable........ 523 146
Increase/(Decrease) in unearned revenue............ 1,502 (180)
Net Cash used in by operating activities.............. (23,843) (13,455)
Investing Activities:
Purchase of businesses................................ (3,696) (4,492)
Purchase of property and equipment.................... (977) (1,141)
Net cash used in investing activities (4,673) (5,633)
Financing activities:
Net increase in notes payable and other short term obl 31,361 21,734
Sale of common stock 334 0
Net cash provided by financing activities............. 31,695 21,734
Increase/(Decrease) in cash and cash equivalents...... 3,179 2,646
Cash and cash equivalents, beginning of period........ 5,816 1,533
Cash and cash equivalents, end of period.............. $8,995 $4,179
</TABLE>
See notes to unaudited condensed consolidated financial statements
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
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 March 31, 1998; and the interim results of
operations and cash flows for the three month and six month periods
ended March 31, 1998 and 1997. The condensed consolidated balance sheet
at September 30, 1997, 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, 1997. 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,
1997 included in the Company's annual Report on Form 10-K.
The results of operations for the three month and six month periods
ended March 31, 1998 are not necessarily indicative of the results to be
expected for the full year.
NOTE 2 - NET INCOME PER COMMON SHARE
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Statement
128 replaced the previously reported primary and fully diluted earnings
per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants, and convertible securities. Diluted
earnings per share is very similar to the previously reported fully
diluted earnings per share. All earnings per share amounts for all
periods have been presented, and restated where necessary, to conform to
the Statement 128 requirements.
<PAGE>
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Numerator:
Net income $1,798,000 $1,320,000 $ 642,000 $ 576,000
Denominator:
Denominator for basic
Earnings per share -
Weighted avg. shares 4,253,545 4,136,506 4,241,588 4,136,506
Effect of dilutive securities:
Employee stock options 169,771 103,121 163,760 103,167
___________________________________________________
Dilutive potential common shares ------- -------- ------- -------
Denominator for diluted earnings
Per share - adjusted
Weighted average shares 4,423,316 4,239,627 4,405,348 4,239,673
And assumed conversions
___________________________________________________
Basic earnings per share $.42 $.32 $.15 $.14
___________________________________________________
Diluted earnings per share $.41 $.31 $.15 $.14
___________________________________________________
<PAGE>
NOTE 3 - YEAR 2000 ISSUES
The Year 2000 issue is the result of computer programs being written
using two digits rather than four (for example, "97" for 1997) to define
the applicable year. Any of the Company's programs that have time-
sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. In some cases, the new date will cause
computers to stop operating, while in other cases, incorrect output may
result. Since the Company is currently in the process of replacing and
upgrading its computer hardware and software systems to year 2000
compliant platforms, the Company believes that there is little business
risk attributable to the Year 2000 issue.
NOTE 4 - ACQUISITIONS
Effective November 20, 1997, the Company acquired certain assets of
Southeastern Marine Group, Inc. ("Southeastern") which operated a single
retail store location in Hendersonville, Tennessee. This acquisition
included boat, motor and trailer inventory, as well as parts and
accessories inventory of the sellers. The purchase price was $1,741,292
of which $184,000 was financed by the issuance of notes payable to the
sellers.
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of Southeastern have
been included in the consolidated financial statements from the date of
acquisition. The purchase price ($1,741,292) has been allocated to the
tangible net assets acquired ($1,489,887) based on their respective fair
values at the date of acquisition. The resulting excess purchase price
($280,000) was allocated to noncompete agreements and goodwill.
Effective December 15, 1997, the Company acquired certain assets of
Worthen Marine Sales and Service, Inc. ("Worthen") which operated a
single retail store location in Roswell, Georgia. This acquisition
included boat, motor and trailer inventory, as well as parts and
accessories inventory of the seller. The purchase price of $286,666 was
paid in cash.
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of Worthen have been
included in the consolidated financial statements from the date of
acquisition. The purchase price ($286,666) has been allocated to the
tangible net assets acquired ($141,666) based on their respective fair
values at the date of acquisition. The resulting excess purchase price
($145,000) was allocated to noncompete agreements and goodwill.
Effective March 15, 1998, the Company acquired certain assets of HnR
Marine, Inc. ("HnR") which operated a single retail store location in
Claremore, Oklahoma. This acquisition included boat, motor and trailer
inventory, as well as parts and accessories inventory of HnR. The
purchase price of $359,620 was paid in cash.
The acquisition has been accounted for using the purchase method of
accounting and, accordingly, the operating results of HnR have been
included in the consolidated financial statements from the date of
acquisition. The purchase price ($359,620) has been allocated to the
tangible net assets acquired ($284,620) based on their respective fair
values at the date of acquisition. The resulting excess purchase price
($75,000) was allocated to noncompete agreements and goodwill.
<PAGE>
NOTE 5 - SUBSEQUENT ACQUISITION
Effective April 23, 1998, the Company acquired certain assets of Moore's
Marine, Inc. ("Moore's") which operated a single retail store location
in Bossier City, Louisiana. This acquisition included boat, motor and
trailer inventory, as well as parts and accessories inventory of
Moore's. The purchase price of $777,303 was paid in cash. The purchase
price includes tangible net assets of $376,303, based upon their
respective fair values as of the date of acquisition. The resulting
excess purchase price of $401,000, will be allocable to noncompete
agreements and goodwill.
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 23 stores under the name Travis
Boating Center in Texas, Arkansas, Louisiana, Alabama, Tennessee,
Mississippi, Florida, Georgia and Oklahoma, 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.
Travis Boats was incorporated as a Texas corporation in 1979. As used
herein and unless otherwise required by the context, the terms ''Travis
Boats'' and the ''Company'' shall mean Travis Boats & Motors, Inc. and
its direct and indirect subsidiaries.
Since its founding 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 San
Antonio, Texas with the construction of a new store facility. The
Company subsequently made acquisitions of boat retailers operating
within the Texas markets of 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 1990, Travis Boats
has opened or acquired additional store locations in the following
states: Texas (3), Arkansas (2), Louisiana (4), Alabama (2), Tennessee
(2), Mississippi (1), Florida (2), Georgia (1) and Oklahoma (1).
The Company sells approximately 50 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. During fiscal 1997, substantially all of the
boats sold range in size from 16 to 23 feet at prices ranging from
$7,500 to $23,000 with gross profit margins between approximately 21%
and 23%. Approximately 4.5% of new boat sales are personal watercraft
with retail
prices generally ranging from $5,000 to $10,000 and approximately 3.2%
of new boat sales are off-shore fishing boats and cruisers with lengths
of 27 feet or greater and ranging in retail price from $50,000 to
$300,000.
<PAGE>
The Company custom designs and pre-packages combinations of popular
brand-name boats, such as Larson, Sprint, Pro-Line and Sea Ark boats
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
conveniently packaged for immediate enjoyment and competitively priced.
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. The Company's
product line generally consists of boat packages priced from $7,500-
$23,000 with approximate even distribution within this price range. As
the Company continues to operate in Florida and enters other coastal
type markets along the Gulf of Mexico or the Atlantic coast, management
believes that the distribution of off-shore fishing boats and cabin
cruisers will increase as a percentage of net sales. 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.
Results of Operations
Quarter Ended, March 31, 1998 Compared to the Quarter Ended, March 31,
1997 and Six Months Ended, March 31, 1998 Compared to the Six Months
Ended March 31, 1997
Net sales. Net sales increased by 37.7% to $33.4 million in the
second quarter of fiscal 1998 from $24.3 million in the second quarter
of fiscal 1997. For the six months ended, March 31, 1998, net sales
increased by 46.6% to $43.6 million from $29.7 million during the same
period of the prior year. Of the increases in net sales, approximately
$1.7 million and $1.1 million were attributable to a 10.1% and 5.5%
growth in comparable store sales for the quarter (11 stores in base) and
six months (10 stores in base) ended March 31 1998, respectively.
General growth in overall sales volume was primarily the result of the
increased number of stores in operation during the periods (22 vs. 16),
the participation in additional season opening boat and recreation
shows, and a favorable mix of Travis Edition boat sales that has
resulted in a higher average sales price (approximately $15,000 versus
$13,500 in fiscal 1997). A primary component in the favorable mix of
Travis Edition boat packages sold has been the increase in sales of the
Company's "Blue-water" (off-shore) fishing boats and other Travis
Edition boating packages introduced during fiscal 1997. The "Blue-
water" fishing boats, which are typically 25-35 feet in length and
designed for off-shore use, are generally sold in the Company's store
locations serving coastal markets such as those store locations
acquired in Louisiana (1), Mississippi (1) and Florida (2) during
fiscal 1997. As the Company continues to operate in Florida and enters
other coastal type markets along the Gulf of Mexico or the Atlantic
coast, management believes that the distribution of off-shore fishing
boats and cabin cruisers will increase as a percentage of net sales.
<PAGE>
During the quarter and the six months ended March 31, 1998, the Company
also experienced an increase in net sales related to parts/accessories,
service labor and used boats. The Company has continued to focus on
renovating its store base to bring additional store locations to its
superstore standards. Inclusive of the four (4) store locations
recently renovated, the Company has 16 of its 23 locations operating in
facilities meeting its superstore standards. These superstore locations
provide larger and more accessible areas to merchandise and showcase the
Company's parts/accessory product selection and conduct repair work on
boats. Used boat sales have also benefitted from the opening of a new
used boat superstore location in Heber Springs, Arkansas during the
March 1998 quarter. The Company's other used boat superstore, which
opened in early fiscal 1997, is located on the premises of its Beaumont,
Texas store location.
Included within net sales is revenue that the Company earns related to
F&I Products. The Company, through relationships with various national
and local lenders, is able to place financing for its customers' boating
purchases. These lenders allow the Company to ''sell'' the loan at a
rate higher than a minimum rate established by each such lender and the
Company earns fees based on the percentage increase in the loan rate
over the lender's minimum rate. The Company sells these loans without
recourse except that in certain instances the Company must return the
fees earned if the customer repays the loan or defaults in the first
120-180 days.The Company also sells, as a broker, certain types of
insurance (property/casualty, credit life, disability) and extended
service contracts. The Company may also sell these products at amounts
over a minimum established cost and earn income based upon the profit
over the minimum established cost. Net sales attributable to F&I
Products contributed $2.1 million, or 6.3%, of net sales in the second
quarter of fiscal 1998, as compared to $1.2 million or 5.1%, of net
sales for the second quarter of the prior fiscal year. For the six
months ended, March 31, 1998, net sales attributable to F&I Products
contributed $2.5 million, or 5.7% of net sales, compared to $1.4
million or 4.8% of net sales, for the same period of the prior year.
This improvement was primarily due to higher net spreads achieved in the
placement of customer financing, as well as overall increases in the
percentage of customers buying these products (which is referred to as
''sell-through''). This increase was enhanced by the Company's continued
emphasis on training of F&I employees and achievement of established
goals.
Comparable store sales increased by 10.1% for the quarter (11 stores in
base) and 5.5% for the six months (10 stores in base) ended March 31
1998, respectively. In the prior year, comparable store sales increased
by 3.4% for the quarter (9 stores in base) and 6.3% for the six months
(6 stores in base) ended March 31 1997, respectively.The Company's
planned acquisition strategy and subsequent renovation of stores to
superstore standards is expected to continue to negatively impact the
number of stores eligible for comparable store base calculations in
relationship to the total number of store locations operated. As such,
comparable store performance is expected to remain unstable until higher
percentages of the Company's stores are eligible for comparable store
calculations.
Gross profit. Gross profit increased by 42.2% to $9.1 million in
the second quarter of fiscal 1998 from $6.4 million in the same quarter
of fiscal 1997, while gross profit as a percent of sales increased to
27.2% from 26.4% during the same periods. For the six months ended,
March 31, 1998, gross profit increased 51.3% to $11.7 million from $7.7
million in the same period of the prior year, while the gross profit as
a percent of sales increased to 26.9% from 26.1%. 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.
<PAGE>
The Company generally seeks to further leverage the margin through sales
of parts/accessories, service labor and F&I Products, all of which
generally produce gross profit margins in excess of 25%. During the
quarter and the six months ended March 31, 1998, the Company's gross
profit margin was positively impacted by the increased revenues derived
from the parts/accessory, service labor and used boat sales as discussed
above in Net Sales.
Net sales attributable to F&I Products, which have a significant impact
on the gross profit margin, contributed $2.1 million, or 23.2%, of total
gross profit in the second quarter of fiscal 1998, as compared to $1.2
million or 19.4%, of total gross profit for the second quarter of the
prior fiscal year. For the six months ended, March 31, 1998, net sales
attributable to F&I Products accounted for $2.5 million, or 21.2% of the
total gross profit, compared to $1.4 million or 18.3%, 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 45.5% to $5.3 million in second
quarter of fiscal 1998 from $3.6 million for the second quarter of
fiscal 1997. Selling, general and administrative expenses as a percent
of net sales increased to 15.8% in the second quarter of fiscal 1998
from 15.0% for the second quarter of fiscal 1997.
Selling, general and administrative expenses in actual dollars increased
by 55.6% to $9.0 million for the six months ended March 31, 1998, versus
$5.8 million in the same period of the prior fiscal year. In terms of
both actual dollars and as a percentage of net sales, the increase in
selling, general and administrative expenses was primarily attributable
to increased expenses associated with the operation of a larger store
network, through growth in the corporate-office staffing infrastructure
and increased advertising costs associated with introducing Travis
Boats and its Travis Edition products into new geographically diverse
regions. Rental expense also increased as a percent of net sales as the
Company expanded and relocated its Corporate headquarters which had
previously been located in the Austin, Texas superstore facility.
Opening and other start-up costs associated with the relocation and
renovation of store locations also contributed to the increase in selling,
general and administrative expenses.
Depreciation and amortization expenses. Depreciation and
amortization expenses increased by 46.0% to $346,000 in second quarter
of fiscal 1998 from $237,000 for the second quarter of fiscal 1997.
Depreciation and amortization expenses as a percent of net sales
increased to 1.04% in the second quarter of fiscal 1998 from .98% for
the second quarter of fiscal 1997.
Depreciation and amortization expenses in actual dollars increased by
61.3% to $679,000 for the six months ended March 31, 1998, versus
$421,000 in the same period of the prior fiscal year.
Depreciation and amortization expenses increased in the quarter and for
the six months ended, March 31, 1998, primarily as a result of the
acquisitions which occurred in fiscal 1997 and thus far in fiscal 1998,
and through the capitalization of costs such as leasehold or building
improvements associated with the conversion of certain existing stores
to superstore standards.
<PAGE>
Interest expense. Interest expense, in actual dollars, increased
to $578,000 in second quarter of fiscal 1998 from $415,000 in the second
quarter of fiscal 1997, while interest expense as a percent of net sales
remained flat at 1.7% of net sales in the second quarter of both fiscal
1998 and fiscal 1997. For the six months ended March 31, 1998, interest
expense increased to $1.0 million from $629,000 in the same period of
the prior year and interest expense as a percent of net sales increased
to 2.4% from 2.1%. The increase was primarily the result of the
additional debt incurred in the acquisitions occuring during fiscal
fiscal 1998 and 1997 as well as higher balances on the Company's floor
plan and revolving bank lines necessary to support inventory
requirements for the larger store network.
Net Income. The Company experienced a net income of $1.8 million
for the second quarter of fiscal 1998. This represents an increase of
36.2% from the net income of $1.3 million in the second quarter of
fiscal 1997. Net income as a percent of sales remained flat at 5.4% for
the second quarter of fiscal 1998 and 1997, respectively. For the six
months ended, March 31, 1998, net income increased by 11.5% to $642,000
from $576,000 in the same period of the prior year.
The improved net income has primarily been the result of the Company
generating higher net sales levels while attaining higher gross profit
margins.
<PAGE>
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 March 31, 1998, the Company
had working capital of $14.2 million, including $9.1 million in accounts
receivable (primarily contracts in transit from sales) and $57.5 million
in inventories, offset by approximately $5.6 million of accounts payable
and accrued liabilities, and $53.5 million in other short-term
liabilities including revolving/floorplan credit lines outstanding
($50.9 million) and, unearned income ($2.0). As of March 31, 1998, the
aggregate maximum borrowing limits under floor plan and revolving lines
of credit were approximately $100 million, of which the Company was
eligible to borrow approximately $24.1 million pursuant to the Company's
borrowing formula.
Operating activities utilized cash flows of $23.8 million for the first
six months of fiscal 1998 due primarily to the net increases of $21.3
million in inventories and $5.2 million in accounts receivable. In
addition to inventory from the locations acquired since September 30,
1997, it is during the first and second quarter that the Company builds
inventory levels to support the selling season which begins with the
January and February boat shows. The increased accounts receivable
levels reported at March 31, 1998 were primarily the result of contracts
in transit generated from the retail sale of a boat. Thus, the
contracts in transit are generally due from financial institutions that
handle the financing on customer purchases.
The Company used net cash in investing activities of approximately $4.7
million in the first six months of fiscal 1998. During the first six
months of fiscal 1998, the Company acquired substantially all of the
assets of Southeastern Marine Group, Inc. (net cash used of $1.6
million), HnR marine, Inc. (net cash used of $0.4 million), Worthen
Marine Sales and Service, Inc. (net cash used of $0.3 million) and
funded $1.4 million due to the September 30, 1997 acquisitions of
Adventure Marine and Outdoor, Inc., Adventure Marine South, Inc. and
Adventure Boat Brokerage, Inc. The Company also continued to renovate
stores to superstore standards amd updated certain facilities with its
standard superstore trade dress awnings and neon. The acquisitions 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 six months ended March 31, 1998 provided
$31.7 million of cash inflows primarily from the net proceeds of
advances under the Company's revolving and floor plan lines of credit.
These advances were used to fund the increase in inventories, as well
as certain acquisition related and other capital expenditures.
Effective October 31, 1997, the Company increased its revolving line of
credit agented by NationsBank of Texas, N.A. from $15.0 million to $55.0
million. This 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. This line is renewable on October 31, 1999. Pricing is at the
prime rate minus 1.00%, 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 March 31, 1998, $24.5
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.
<PAGE>
The Company also maintains floor plan lines of credit with various
finance companies providing approximately $45.0 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 March
31, 1998, approximately $26.4 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 $57.5 million and $34.4 million as of March
31, 1998 and September 30, 1997, respectively. Costs in excess of net
assets acquired increased by approximately $0.3 million to $5.7 million
in the first six months of fiscal 1998 due to the acquisitions of the
additional three store locations thus far in fiscal 1998.
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 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 fiscal years 1997 and 1996 collectively,
the average annual net sales for the quarterly periods ended March 31
and June 30 represented in excess of 27% and 40%, 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
upcoming selling season which begins with boat and recreation shows
occurring during January through March 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.
The Company's business is also significantly affected by weather
patterns. Weather conditions that are unseasonable or unusual may
adversely affect the Company's results of operations. For example,
drought conditions or merely reduced rainfall levels, as well as
excessive rain, may affect the Company's sales of boating packages and
related products and accessories. While management believes that the
Company's quarterly net sales will continue to be impacted by
seasonality, quarterly results may become less susceptible to certain
regional weather conditions as expansion occurs throughout the southern
United States.
<PAGE>
Quarterly results may fluctuate as a result of the expenses associated
with new store openings or acquisitions. The Company, prior to fiscal
1997, had attempted to concentrate expansion during the seasonal
slowdown generally occurring in the quarter ending December 31. During
fiscal 1997, the Company modified its acquisition strategy to acquire
store locations through-out the fiscal year. This was done to allow the
Company the opportunity to derive in-season sales from the acquisitions
as well as to provide a longer period in which to integrate the acquired
store's operations. Accordingly, the results for any quarterly period
may not be indicative of the expected results for any other quarterly
period.
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 Report on Form 10-Q, including statements in ''Item 1. Business'',
and ''Management's Discussion and Analysis of Financial Condition and
Results of Operations'', are forward-looking statements as that term is
defined in Section 21E of the Exchange Act that involve a number of
uncertainties. The actual results of the future events described in the
forward-looking statements in this Report on Form 10-Q could differ
materially from those stated in such forward-looking statements. Among
the factors that could cause actual results to differ materially are:
general economic conditions, competition and government regulations, as
well as the risks and uncertainties discussed in the Companies annual
Report on Form 10-K filed for the Company's 1997 fiscal year, including
without limitation, the matters discussed in ''Risk Factors'' and the
uncertainties set forth from time to time in the Company's other public
reports, filings and public statements. All forward-looking statements
in this Report on Form 10-Q are expressly qualified in their entirety by
the cautionary statements in this paragraph.
<PAGE>
PART II. OTHER INFORMATION
Item 2.
(c) Securities Issued by Registrant
None
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: May 15, 1998 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> 6-MOS 12-MOS
<FISCAL YEAR-END> SEP-30-98 SEP-30-97
[PERIOD-START] OCT-01-97 OCT-01-96
[PERIOD-END] MAR-31-98 SEP-30-97
[CASH] 8,995 5,816
[SECURITIES] 0 0
[RECEIVABLES] 9,135 3,915
<ALLOWOWANCES> 0 0
[INVENTORY] 57,538 34,450
[CURRENT-ASSETS] 76,906 44,725
[PP&E] 12,624 11,519
[DEPRECIATION] 3,177 2,750
[TOTAL-ASSETS] 92,367 59,121
[TOTAL-LIABILITIES] 67,334 35,064
[BONDS] 4,664 5,145
[PREFERRED-MANDATORY] 0 0
[COMMON] 43 42
[OTHER-SE] 24,990 24,015
[TOTAL-LIABILITY-AND-EQUITY] 92,367 59,121
[SALES] 43,569 91,309
[TOTAL-REVENUES] 43,569 91,309
[CGS] <31,854> <67,354>
[TOTAL-COSTS] <31,854> <67,354>
[OTHER-EXPENSES] <8,988> <16,475>
[LOSS-PROVISION] 0 0
[INTEREST-EXPENSE] <1,039> <1,354>
[INCOME-PRETAX] 1,036 6,114
[INCOME-TAX] <394> <2,133>
[INCOME-CONTINUING] 642 3,982
[DISCONTINUED] 0 0
[EXTRAORDINARY] 0 0
[CHANGES] 0 0
[NET-INCOME] 642 3,982
[EPS-PRIMARY] .15 .94
[EPS-DILUTED] .15 .93
</TABLE>
