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, 2000
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 - 4,413,027 shares as of May 11, 2000.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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Item 1. Financial Statements
Travis Boats & Motors, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share data and stores March 31, September 30,
open) 2000 1999
------------- ----------------
(unaudited)
ASSETS:
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,953 $ 4,125
Accounts receivable, net 17,497 12,421
Inventories, net 109,930 75,700
Deferred tax asset 136 136
Prepaid federal income taxes 75 0
Prepaid expenses and other 1,786 1,177
--------- ---------
Total current assets 134,377 93,559
Property and equipment:
Land 5,819 5,819
Buildings and improvements 12,498 11,069
Furniture, fixtures and equipment 8,950 8,056
--------- ---------
27,267 24,944
Less accumulated depreciation (5,490) (4,529)
---------- ---------
21,777 20,415
Deferred tax asset 121 121
Intangibles and other assets :
Goodwill and non-compete agreements, net 11,256 11,637
Other assets 557 199
--------- ---------
Total assets $ 168,088 $ 125,931
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,674 $ 3,613
Accrued liabilities 1,847 3,179
Amounts due for purchase of business 977 2,134
Income taxes payable 0 2,820
Unearned revenue 1,292 149
Floor plan and revolving line of credit 106,573 68,558
Current portion of notes payable and other short-term 5,622 989
obligations
--------- ---------
Total current liabilities 121,985 81,442
Notes payable, less current portion 8,543 6,897
Stockholders' equity
Serial Preferred stock, $.01 par value, 1,000,000 shares
authorized, no shares outstanding
Common Stock, $.01 par value, 50,000,000 authorized,
4,412,027 and 4,326,022 issued and outstanding at
March 31, 2000 and September 30, 1999, respectively 44 43
Paid-in capital 15,501 13,816
Retained earnings 22,015 23,147
--------- ---------
Total stockholders' equity 37,560 37,592
--------- ---------
Total liabilities and stockholders' equity $ 168,088 $ 125,931
========= =========
</TABLE>
See notes to unaudited condensed consolidated financial statements
<PAGE>
<TABLE>
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Travis Boats & Motors, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations (Unaudited) (in
thousands, except share data and stores open)
Three months ended Six months ended
March 31, March 31,
2000 1999 2000 1999
------------------------- -------------------------
<S> <C> <C> <C> <C>
Net sales.............................................. $ 57,385 $ 43,965 $ 81,012 $ 56,062
Cost of goods sold..................................... 42,549 32,606 60,202 41,762
---------- ---------- ---------- ----------
Gross profit........................................... 14,836 11,359 20,810 14,300
Selling, general and administrative.................... 10,567 7,252 18,218 11,757
Depreciation and amortization.......................... 629 404 1,253 819
---------- ---------- ---------- ----------
11,196 7,656 19,471 12,576
Operating income....................................... 3,640 3,703 1,339 1,724
Interest expense....................................... (1,768) (948) (3,142) (1,503)
Other income/(expense)................................. 8 31 17 59
---------- ---------- ---------- ----------
Income/(Loss) before income taxes...................... 1,880 2,806 (1,786) 280
Provision for income taxes............................. 690 1,029 (654) 103
---------- ---------- ---------- ----------
Net Income (Loss)...................................... $ 1,190 $ 1,777 ($ 1,132) $ 177
=========== ========== ========== ==========
Basic Earnings/(Loss) Per Share........................ $ 0.27 $ 0.41 ($ 0.26) $ 0.04
Diluted Earnings/(Loss) Per Share...................... $ 0.27 $ 0.40 ($ 0.26) $ 0.04
Weighted average common shares ourstanding............. 4,412,027 4,288,019 4,394,168 4,286,794
Weighted average dilutive common shares outstanding.... 4,487,134 4,429,629 4,394,168 4,421,564
Stores open at end of period........................... 39 32 39 32
========== ========== ========== ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements
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<TABLE>
<CAPTION>
Travis Boats & Motors, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flow
(in thousands)
Six months ended
March 31,
2000 1999
----------------------------------
Operating activities:
<S> <C> <C>
Net Income/(Loss) ($ 1,132) $ 177
Adjustments to reconcile net loss to net cash used in
Operating activities:
Depreciation.............................................................. 830 570
Amortization.............................................................. 423 249
Changes in operating assets and liabilities
Accounts receivable................................................ (5,076) (10,265)
Prepaid expenses................................................... (609) (746)
Inventories........................................................ (34,230) (24,916)
Other assets....................................................... (358) (207)
Accounts payable................................................... 2,061 2,027
Accrued liabilities................................................ (1,332) 833
Income tax benefit................................................. (2,895) 0
Unearned revenue................................................... 1,143 351
---------- ---------
Net Cash used in operating activities..................................... (41,175) (31,927)
Investing Activities:
Purchase of businesses.................................................... (94) (4,898)
Purchase of property and equipment........................................ (2,197) (1,128)
----------- ---------
Net cash used in investing activities (2,291) (6,026)
Financing activities:
Net increase in notes payable and other short term obligations............ 44,294 39,702
Sale of common stock 0 24
----------- ---------
Net cash provided by financing activities................................. 44,294 39,726
Change in cash and cash equivalents....................................... 828 1,773
Cash and cash equivalents, beginning of period............................ 4,125 4,618
----------- ---------
Cash and cash equivalents, end of period.................................. $ 4,953 $ 6,391
=========== =========
</TABLE>
See notes to unaudited condensed consolidated financial statements
<PAGE>
MARCH 31, 2000
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, 2000;
and the interim results of operations and cash flows for the three and six month
periods ended March 31, 2000 and 1999. The condensed consolidated balance sheet
at September 30, 1999, 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, 1999. 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, 1999 included in the Company's annual Report on Form 10-K.
The results of operations for the three and six month periods ended March 31,
2000 are not necessarily indicative of the results to be expected for the full
fiscal 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 where necessary, restated to conform to the
Statement 128 requirements.
Statement 128 requires the calculation of earnings per share to exclude common
stock equivalents when the inclusion of such would be anti-dilutive. In the six
months ended March 31, 2000, the inclusion of common stock equivalents would
have been anti-dilutive based upon the net loss posted by the Company. As such,
all common stock equivalents were excluded.
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<CAPTION>
The following table sets forth the computation of basic and diluted net loss per
share:
Three Months Ended Six Months Ended
March 31 March 31
2000 1999 2000 1999
---- ---- ---- ----
Numerator:
<S> <C> <C> <C> <C>
Net income $1,190,000 $1,777,000 ($1,132,000) $ 177,000
Denominator:
Denominator for basic
earnings per share -
weighted avg. shares 4,412,027 4,287,063 4,394,168 4,286,794
Effect of dilutive securities:
Employee stock options 75,107 141,610 --------- 134,770
-------------------------------------------------------------
Denominator for diluted earnings
per share - adjusted
weighted average shares 4,487,134 4,428,673 4,394,168 4,421,564
and assumed conversions
-------------------------------------------------------------
Basic earnings per share $.27 $.41 ($.26) $.04
-------------------------------------------------------------
Diluted earnings per share $.27 $.40 ($.26) $.04
-------------------------------------------------------------
</TABLE>
<PAGE>
As of March 31, 2000, the Company had issued and outstanding incentive stock
options to certain officers and employees totaling 89,500 shares which had a
strike price exceeding the closing price of the Company's common stock on such
date. The 89,500 option shares have a weighted average strike price of $19.98
and a weighted average outstanding remaining life of 7.72 years.
The Company's unaudited consolidated results of operations assuming all
acquisitions accounted for under the purchase method of accounting had occurred
on October 1, 1998 are as follows for the three and six months ended March 31,
1999 and 2000, respectively:
<TABLE>
<CAPTION>
3 Mos. 3/31/99 3 Mos. 3/31/00 6 Mos. 3/31/99 6 Mos. 3/31/00
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net Sales $57,656,000 $57,385,000 $79,679,000 $81,012,000
Net Income/(Loss) $ 2,046,000 $ 1,190,000 $ (471,000) $(1,132,000)
Diluted earnings/(loss) per share $0.46 $0.27 ($0.11) ($0.26)
</TABLE>
The unaudited pro forma results of operations are presented for informational
purposes only and may not necessarily reflect the future results of operations
of the Company or what results of operations would have been had the Company
owned and operated the business as of October 1, 1998.
NOTE 3 - ACQUISITIONS
The chart below summarizes significant acquisitions made by the Company during
the fiscal years ended September 30, 1999, 1998 and 1997. Each acquisition was
completed through an asset purchase (except for Adventure Marine in fiscal 1997
and Shelby Marine in fiscal 1999, which were stock purchases) and has been
accounted for using the purchase method of accounting. The operating results of
the companies acquired have been included in the consolidated financial
statements from the respective date of acquisition. The assets acquired
generally include boat, motor and trailer inventory, parts and accessories
inventory and to a lesser extent, property, plant and equipment. A summary of
the Company's significant acquisitions follows:
<TABLE>
<CAPTION>
Non-compete
Date of Purchase Tangible Agreements Cash Liabilities Notes Stock
Name of Company Acquisition Price Net Assets and Goodwill Paid Assumed Issued Issued
--------------- ----------- -------- ---------- ------------ ---- ----------- ------ ------
(In Thousands)
Fiscal 1999
- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Amlin, Inc. dba Magic 01/99 $1,639 $6,019 $1,090 $1,639 $5,470 $ -- $ --
Marine
Sportsman's Haven 01/99 1,748 2,624 514 1,098 1,390 650 --
Pier 68 Marina 02/99 738 2,218 562 408 2,043 329 --
DSA Marine Sales & 04/99 2,147 4,798 1,597 2,147 4,248 -- --
Service dba The Boatworks
Shelby Marine, Inc. 06/99 1,334 3,426 1,050 809 3,142 -- 525
The New 3 Seas, Inc. 09/99 1,103 1,419 1,100 -- 1,416 3 1,100
Fiscal 1998
- -----------
Southeastern Marine 11/97 1,730 $1,390 $ 280 $1,606 $ -- $124 $ --
Worthen Marine 12/97 287 142 145 287 -- -- --
HnR Marine 04/98 359 359 0 359 -- -- --
Moore's Marine 05/98 777 376 401 777 -- -- --
Rodgers Marine 09/98 677 2,093 350 327 1,766 -- 350
Fiscal 1997
- -----------
North Alabama Watersports 10/96 892 687 $ 205 812 -- 80 --
Tri-Lakes Marine 11/96 1.243 1,892 644 643 1,937 600 --
Bent's Marine 02/97 1,519 840 679 1,064 -- 455 --
McLeod Marine 08/97 958 730 228 958 -- -- --
Adventure Marine 09/97 3,023 5,536 2,690 1,430 5,203 115 1,478
</TABLE>
NOTE 4 - COMPREHENSIVE INCOME
For the quarter ended March 31, 2000, Comprehensive Income equaled Net Income.
For the six month period ended March 31, 2000, the Company recorded no
comprehensive income items, therefore Comprehensive Net Loss equaled Net Loss.
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 39 stores under the name Travis Boating Center in Texas,
Arkansas, Louisiana, Alabama, Tennessee, Mississippi, Florida, Georgia and
Oklahoma seeks to differentiate 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.
History
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 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 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 34 additional store locations in the following states: Texas
<PAGE>
(3), Arkansas (4), Louisiana (4), Alabama (2), Tennessee (5), Mississippi (1),
Florida (13), Georgia (1) and Oklahoma (1). Effective January 1, 2000, the
Company consolidated its store facility in St. Petersburg, Florida into its
Clearwater, Florida operations. In addition, the Company opened a new "de novo"
or start-up store location in Lighthouse Point (Pompano Beach area), Florida on
March 20, 2000 and another location in Stuart, Florida on April 1, 2000.
Accordingly, the Company's store count has been adjusted to 39 store locations.
The Company custom designs and pre-packages approximately 75 different models
and combinations of popular brand-name boats, such as Larson, Wellcraft, Carver,
Bayliner, Sprint, and Sea Ark boats with outboard motors generally manufactured
by Outboard Marine Corporation or Brunswick, along with 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, include boats ranging in size from 16 feet to over 30 feet in length
(with an emphasis on the 16 to 25 foot pleasure boat category). Each Travis
Edition package has typically 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 to $25,000 with approximate even
distribution within this price range. While the Company's sales have
historically been concentrated on boats with retail sales prices of $25,000 or
less, the Company in limited market areas and quantities does sell boats that
have retail sales prices in excess of $300,000. Additionally, as the Company
continues to operate in Florida and enters other markets along the Gulf of
Mexico or other new coastal areas, management believes that the distribution of
off shore fishing boats and cabin cruisers will continue to 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, 2000 Compared to the Quarter Ended, March 31, 1999 and
Six Months Ended, March 31, 2000 Compared to the Six Months Ended, March 31,
1999.
Net sales. Net sales increased by 30.4% to approximately $57.3 million
in the second quarter of fiscal 2000 from $44.0 million in the second quarter of
fiscal 1999. For the six months ended, March 31, 2000, net sales increased by
44.4% to $80.9 million from $56.1 million during the same period of the prior
year. Of the increases in net sales, approximately $558,000 and $2.4 million
were attributable to a 1.7% and 6.9% growth in comparable store sales for the
quarter (23 stores in base) and six months (18 stores in base) ended March 31
2000, respectively.
General growth in overall sales volume was primarily the result of the increased
number of stores in operation during the periods (39 vs. 32), 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 than
in the same period of the prior fiscal year. 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, cruisers (boats
generally exceeding 30 ft) and other Travis Edition boating packages. The
"Blue-water" fishing boats and cruisers, are generally sold in the Company's
store locations serving coastal markets from Texas southeast to Florida. 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 cruisers will increase as a
percentage of net sales.
During the quarter and the six months ended March 31, 2000, the Company also
experienced an increase in net sales related to parts/accessories, service labor
and used boats. The Company has continued to develop improved point of sale
merchandising and sales awareness of these products. This has included the
continued remodeling and development of stores into the Travis superstore
prototype which management believes allows for increased merchandising and
service capacities.
<PAGE>
Also, 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 $2.4
million, or 4.2%, of net sales in the second quarter of fiscal 2000, as compared
to $2.2 million or 5.0%, of net sales for the second quarter of the prior fiscal
year. For the six months ended, March 31, 2000, net sales attributable to F&I
Products contributed $3.1 million, or 3.8% of net sales, compared to $2.5
million or 4.5% of net sales, for the same period of the prior year. While net
F&I sales have increased in actual dollars, management attributes the decline in
net F&I sales, as a percentage of total sales to various factors including the
following: (i) a shift to a higher average selling price of boats to customers
less desirous or in need of financing to fund their boat purchase, (ii) selling
certain boats that have sales prices above the amount in which the lender will
pay a fee consistent with what is otherwise eligible to be earned by the Company
and (iii) active solicitation of boat loans from certain credit unions and other
"non-conventional" financing sources offering favorable interest rates and
financing terms. (see also: Gross Profit)
Gross profit. Gross profit increased by 29.8% to $14.8 million in the
second quarter of fiscal 2000 from $11.4 million in the same quarter of fiscal
1999, while gross profit as a percent of sales remained flat at approximately
25.8% during the same periods. For the six months ended, March 31, 2000, gross
profit increased 44.8% to $20.7 million from $14.3 million in the same period of
the prior year and during the same period gross profit as a percent of sales
increased to 25.6% from 25.5%. The overall increase in gross profit as a percent
of sales for the six months ended March 31, 2000 was primarily related to the
Company's pricing structure which has established retail prices at a level
designed to increase profit margins and compensate store level management for
meeting and exceeding pre-established goals. The Company also has benefitted
from the net sales attributable to traditionally higher gross profit sales
categories such as: F&I income, over the counter sales of parts & accessories
and service labor.
Net sales of these products contributed $2.4 million, or 16.2%, of total gross
profit in the second quarter of fiscal 2000, as compared to $2.2 million or
19.3%, of total gross profit for the second quarter of the prior fiscal year.
For the six months ended, March 31, 2000, net sales attributable to F&I Products
accounted for $3.1 million, or 15.0% of the total gross profit, compared to $2.5
million or 17.5%, 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 44.8% to $10.5 million in second quarter of
fiscal 2000 from $7.3 million for the second quarter of fiscal 1999. Selling,
general and administrative expenses as a percent of net sales increased to 18.3%
in the second quarter of fiscal 2000 from 16.5% for the second quarter of fiscal
1999. Selling, general and administrative expenses were $18.1 million, or 22.4%
as a percentage of net sales, for the six months ended March 31, 2000, versus
$11.8 million, or 21.0% as a percentage of net sales 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,
growth in the corporate-office staffing infrastructure, WAN data line charges,
health insurance costs and store lease expenses. However, the increase in
selling, general and administrative expenses was partially offset by a reduction
in (i) sales commission percentages as a percent of net sales through a new
commission structure and (ii) advertising expenses through the centralization of
all advertising expenditures and the utilization of an advertising agency.
<PAGE>
Depreciation and amortization expenses. Depreciation and amortization
expenses increased by 55.7% to $629,000 in the second quarter of fiscal 2000
from $404,000 for the second quarter of fiscal 1999. Depreciation and
amortization expenses as a percent of net sales increased to 1.1% in the second
quarter of fiscal 2000 from 0.9% for the second quarter of fiscal 1999.
Depreciation and amortization expenses, as a percentage of net sales, increased
to 1.6% for the six months ended March 31, 2000, versus 1.5% in the same period
of the prior fiscal year.
Depreciation and amortization expenses increased as a percentage of net sales in
the quarter and for the six months ended, March 31, 2000, primarily as a result
of the increased depreciable assets (including buildings, equipment and
leasehold improvements) and goodwill/noncompete amortization expenses associated
with six acquisitions and four de novo stores consummated in fiscal 1999.
Interest expense. Interest expense, in actual dollars, increased to
$1.8 million in the second quarter of fiscal 2000 from $948,000 in the second
quarter of fiscal 1999, while interest expense as a percent of net sales
increased to 3.1% from 2.2% of net sales in the second quarter of both fiscal
2000 and fiscal 1999, respectively. For the six months ended March 31, 2000,
interest expense increased to $3.1 million from $1.5 million in the same period
of the prior year and interest expense as a percent of net sales increased to
3.9% from 2.7%. The increase was primarily the result of the additional debt
incurred to support inventory requirements for the larger store network and a
significant rise in short term interest rates compared to the prior year.
Net Income. Net income was $1.2 million in the second quarter of fiscal
2000, a decrease of 33.3% from net income of $1.8 million for the second quarter
of fiscal 1999. Accordingly, net income, as a percent of net sales, decreased to
2.1% from 4.0% for the second quarter of fiscal 2000 and 1999, respectively. For
the six month period ended, March 31, 2000, the Company reported a net loss of
$1.1 million, a decrease of approximately $1.3 million from the net income of
$177,000 posted in the year earlier period.
Although the Company reported a 30.4% and 44.4% increase in revenues in the
quarter and year to date ended, March 31, 2000 over the same periods of the
prior year, and maintained stable to slightly improved gross profit margins
within those same periods, net income was negatively affected by higher
operating expenses associated with a larger store network and increased interest
expenses resulting from a larger debt burden and an increase in short term
interest rates.
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, 2000, the Company had working capital of $12.4 million, centered in $109.9
million in inventories, offset by $106.6 million in short-term
revolving/floorplan credit lines outstanding. As of March 31, 2000, the
aggregate maximum borrowing limits under floor plan and revolving lines of
credit were approximately $116.0 million, of which the Company was eligible to
borrow approximately an aggregate of $112.0 million pursuant to the Company's
borrowing base formulas.
Operating activities used cash of $41.2 million for the first six months of
fiscal 2000 due primarily to the net increases of $34.2 million in inventories,
$5.1 million in receivables and the reported net loss. Inventory growth
traditionally builds during the first and second quarters 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.
Merchandise inventories were $109.9 million and $75.7 million as of March 31,
2000 and September 30, 1999, respectively. This inventory level generally falls
to an annual low point during the fourth fiscal quarter. The increased accounts
receivable levels reported at March 31, 2000 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 $2.2 million
in the first six months of fiscal 2000 as the Company continued to renovate
stores to superstore standards, update certain facilities with its standard
<PAGE>
superstore trade dress awnings and neon, and continued construction of new
superstore facilities in San Antonio (which will replace the existing San
Antonio location) and Clearwater, Florida.
Financing activities for the six months ended, March 31, 2000 provided $44.3
million of cash flows primarily from the net proceeds of borrowings under the
Company's credit facilities.
Effective January 31, 2000 the Company terminated and paid-off its $55.0 million
line of credit with Bank of America as well as its $47.0 million in floor plan
lines of credit with various finance companies. Concurrently with such
pay-off's, the Company entered into new revolving line of credit agreements
aggregating $116.0 million, with Deutsche Financial Services providing $60.0
million and Transamerica Distribution Finance providing $56.0 million
(collectively, the "New Financing"). The New Financing has a three year term and
includes both (i) floor plan financing which utilizes subsidies from
manufacturers to provide for certain interest free periods each calendar year
(usually August through May) and (ii) a revolving credit sub-limit that is
governed by borrowing bases applicable to the Company's assets. The New
Financing is governed by loan agreements containing various financial covenants
concerning, among others, ratios governing tangible net worth, liquidity and
leverage. Pricing is at the Company's election of the prime rate ranging from
minus 0.75% to minus 1.00% or on a LIBOR based price structure. There is a fee
on the unused portion assessed quarterly. As of March 31, 2000, $106.6 million
was drawn on the revolving line and the Company could borrow an additional $9.4
million, of which approximately $3.4 million was immediately available for
borrowing based upon the revolving line's borrowing formula. As the Company
purchases inventory, the amount purchased increases the borrowing base
availability and typically the Company makes a determination to borrow depending
upon anticipated working capital requirements.
Management believes the Company to be in compliance with all terms and
conditions of the loan agreements governing the New Financing.
The Company's newly refinanced revolving credit facility 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 2000.
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. Over
the previous three-year period, the average annual net sales for the quarterly
periods ended March 31 and June 30 represented approximately 27% and 41%,
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
sale 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.
Quarterly results may fluctuate as a result of the expenses associated with new
store openings or acquisitions, including the timing thereof. Prior to fiscal
1997, the Company had attempted to concentrate expansion during the seasonal
slowdown generally occurring in the quarter ending December 31. During fiscal
<PAGE>
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. Alternatively, the
acquisition costs would typically include more inventory expense than if such
acquisition occurred in the slow, winter season since marine dealer's generally
maintain higher in-stock levels during the summer months. Such inventory
acquired may have prices greater than the Company would otherwise pay for such
product and accordingly, the Company may elect to dispose of the acquired
product at reduced prices. Accordingly, the results for any quarterly period may
not be indicative of the expected results for any other quarterly period.
Other Matters.
- -------------
During fiscal 1999, the Company engaged Bank of America Securities ("BAS") to
propose a private placement of subordinated notes. BAS has filed suit against
the Company in the amount of $150,000 plus expenses relative to collection of a
fee for cancellation of the engagement. The Company has disputed the fee and
believes that it is not contractually responsible for payment. While the Company
believes that the BAS suit is without merit and is vigorously contesting it, no
assurance can be given that the Company will prevail.
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 this Report on
Form 10-Q, 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.
PART II. OTHER INFORMATION
Item 2.
(c) Securities Issues by Registrant
None
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, 2000 Travis Boats & Motors, Inc.
By: /s/ Michael B. Perrine
-----------------------------------
Michael B. Perrine
Chief Financial Officer, Treasurer and Secretary
(Principal Accounting and Financial Officer)
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<ARTICLE> 5
<LEGEND>
Financial Data Schedule for Travis Boats & Motors, Inc.
</LEGEND>
<CIK> 0001012734
<NAME> Travis Boats & Motors, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-31-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 4,953
<SECURITIES> 0
<RECEIVABLES> 17,750
<ALLOWANCES> (253)
<INVENTORY> 109,930
<CURRENT-ASSETS> 134,377
<PP&E> 27,267
<DEPRECIATION> 5,074
<TOTAL-ASSETS> 168,088
<CURRENT-LIABILITIES> 130,528
<BONDS> 8,543
0
0
<COMMON> 44
<OTHER-SE> 37,516
<TOTAL-LIABILITY-AND-EQUITY> 168,088
<SALES> 81,012
<TOTAL-REVENUES> 81,012
<CGS> (60,202)
<TOTAL-COSTS> (60,202)
<OTHER-EXPENSES> (19,471)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,142)
<INCOME-PRETAX> (1,786)
<INCOME-TAX> (654)
<INCOME-CONTINUING> (1,132)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,132)
<EPS-BASIC> (0.26)
<EPS-DILUTED> (0.26)
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